EN
2015
Special Report
EUROPEAN
COURT
OF AUDITORS
NO EU support for rural
infrastructure: potential to
achieve significantly
greater value for money
25
EUROPEAN COURT OF AUDITORS
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Luxembourg: Publications Office of the European Union, 2016
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ISSN 1977-5679
doi:10.2865/302320
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EN
2015
Special Report
NO EU support for rural
infrastructure: potential to
achieve significantly
greater value for money
(pursuant to Article 287(4), second subparagraph, TFEU)
25
Audit team
02
The ECA’s special reports set out the results of its performance and compliance audits of specific budgetary areas or
management topics. The ECA selects and designs these audit tasks to be of maximum impact by considering the risks
to performance or compliance, the level of income or spending involved, forthcoming developments and political and
public interest.
This performance audit was produced by Audit Chamber I — headed by ECA Member Augustyn Kubik — which specialises in preservation and management of natural resources spending areas. The audit was led by ECA Member Nikolaos
Milionis, supported by Ioulia Papatheodorou, head of private office; Kristian Sniter, private office attaché; Michael Bain,
head of unit; Diana Voinea, team leader and Lorenzo Pirelli, deputy team leader. The audit team consisted of Ramona
Bortnowschi, Malgorzata Frydel, Athanasios Koustoulidis, Maria Eulàlia Reverté i Casas and Michael Spang. Language
support by Hannah Critoph, Jeremy Gardner, Paulina Pruszko, Agata Sylwestrzak, Fiona Urquhart and Adrian Williams.
Secretarial assistance was provided by Terje Teppan-Niesen.
From left to right: J. Gardner, M. Frydel, K. Sniter, H. Critoph, M. Bain, N. Milionis, M. E. Reverté i Casas,
D. Voinea, I. Papatheodorou, L. Pirelli.
Contents
03
Paragraphs
Glossary
I – V
Executive summary
1 – 8
Introduction
1
The importance of rural infrastructure investments in the European Union
2 – 8
Rural development support for infrastructure investments
9 – 14
Audit scope and approach
15 – 89
Observations
15 – 41
Part I — Insufficient justification for using EU rural development funds and weak coordination
with other funds
20 – 24
Member States did not always clearly justify the need for the EU rural development funds
25 – 30
The risk of deadweight was not effectively mitigated, though some good practices were identified
31 – 36
Effective coordination of funds was often affected by weak demarcation lines and insufficient mechanisms
to ensure complementarity
37 – 41
The Commission focused on improving coordination in the 2014-2020 programming period in order to
address the weaknesses of the past
42 – 72
Part II — Limited value for money in the implementation of the measures audited
43 – 49
Selection procedures did not always direct funding towards the most cost‑effective projects
50 – 54
Checks on the reasonableness of costs and public procurement procedures did not effectively limit the risk
of excessive project costs
55 – 60
Sustainability‑related requirements did not take into account the useful life of the investments
61 – 65
Long delays in the administrative process impacted the measures’ efficiency and effectiveness
66 – 72
The Commission started to systematically follow up weaknesses and related Member States' action plans
late in the programming period
04
Contents
73 – 89
Part III — The monitoring and evaluation system did not produce adequate information on project
results
77 – 83
The audited projects delivered the expected physical outputs, but reliable information on project results
was often unavailable
84 – 89
The Commission has encouraged Member States to improve monitoring and evaluation, but some
weaknesses are likely to persist in the 2014-2020 programming period
90 – 109
Conclusions and recommendations
Annex I
Annex II — Overview of projects audited
Reply of the Commission
— EU funds for infrastructure measures 125, 321, 322 and 323 — programmed and
spent in the 2007-2013 programming period
Glossary
05
CMEF (common monitoring and evaluation framework): EU‑wide monitoring and evaluation framework for rural
development in the 2007-2013 programming period.
CMES (common monitoring and evaluation system): EU‑wide monitoring and evaluation system for rural
development in the 2014-2020 programming period.
Complementarity: A deliberate counterpoint or synergy between two or more funds, when applied to a particular
territory or field of action, intending to result in needs being better met than if only one fund was applied and
avoiding funding gaps.
Demarcation: Separation lines between the EAFRD and other funds, based on geographical areas, types of projects
supported or types of beneficiaries. Demarcation is intended to result in avoiding overlaps of funds.
Deadweight effect: A situation where a subsidised activity or project would have been wholly or partly undertaken
without the grant aid.
EAFRD: European Agricultural Fund for Rural Development.
European Structural and Investment Funds (ESI Funds, ESIF): A new term for five EU funds providing support
under cohesion policy in the 2014-2020 programming period. These five funds are: the European Regional
Development Fund (ERDF); the European Social Fund (ESF); the Cohesion Fund (CF); the European Agricultural Fund
for Rural Development (EAFRD); the European Maritime and Fisheries Fund (EMFF).
(Public) intervention: An action, such as an ‘operation’, ‘measure’, programme or project carried out by or funded
by a public authority.
LEADER approach: A method to achieve the objectives of the EU’s rural development policy through bottom‑up
implementation rather than the traditional top‑down approach. ‘Leader’ is a French acronym for ‘links between
rural development actions’.
Managing authority: The local, regional or national body appointed by the Member State to submit a rural
development programme to the Commission and then manage and implement it.
Measure: An aid scheme for implementing a policy. A measure defines the rules, such as eligibility and selection
criteria, for the projects that can be financed.
Operation: A project, contract or other action financed under a ‘measure’.
Outputs: Something that is produced with the resources allocated to an ‘intervention’.
Programming period: Multiannual framework to plan and implement EU policies such as the rural development
policy. This audit concerns mainly the 2007-2013 period. The current rural development period runs from
2014 to 2020.
Public procurement: Tender process to be followed by public bodies when purchasing goods, works and services
above a certain price threshold. The aim is to obtain the best value offer by creating sufficient competition between
suppliers and to award contracts in a fair, transparent and non‑discriminating way, in line with Directives 2004/18/
EC1 and 2004/17/EC2.
1
Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works
contracts, public supply contracts and public service contracts (OJ L 134, 30.4.2004, p. 114).
2
Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in
the water, energy, transport and postal services sectors (OJ L 134, 30.4.2004, p. 1).
Glossary
06
Reference prices: Prices for items of equipment, machinery, construction materials or building costs, labour costs,
etc. against which the Member State authorities evaluate the project costs proposed in grant applications.
Results: The direct effects or changes that arise due to the ‘intervention’.
Rural development programme (RDP): A programming document prepared by a Member State and approved by
the Commission to plan and monitor the implementation of the EU rural development policy at regional or national
level.
Rural infrastructure: The physical assets that support rural areas, such as roads, bridges, water supply systems,
sewers, waste management facilities, electrical grids and telecommunications, but also public facilities such as
schools, kindergartens, sports facilities and community centres, which are commonly referred to as social and
cultural infrastructure.
Shared management: Method of implementation of the EU budget where the implementation tasks are delegated
to the Member States3, while the Commission retains final responsibility.
3
Article 59 of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to
the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ L 298, 26.10.2012, p. 1).
07
Executive
summary
I
For the 2007-2013 programming period, the Member
States allocated 13 billion euro of EU funds to investments in rural infrastructure through four measures
in their rural development programmes (RDPs). The
EU funds are supplemented by national spending,
which brings the total budget for these measures to
almost 19 billion euro. The funding was provided to
private and public beneficiaries, in order to boost
economic growth, enhance the attractiveness of rural
areas and improve their links with major infrastructures. The financed projects were mainly rural roads,
water management schemes and social and cultural
infrastructure.
II
The Court’s performance audits assess whether the
principles of sound financial management (economy,
efficiency, effectiveness) have been applied, seeking
to identify good practices in achieving the highest
benefit with the EU funds available. For this particular
audit, the Court examined whether the Commission
and the Member States had achieved value for money
with the rural infrastructure measures they decided
to finance. Audit visits were made to the Commission and to five Member States, selected on the basis
of the significance of the amounts allocated to rural
infrastructure.
This was due to the fact that:
— Member States did not always clearly justify the
need for using EU rural development funds. Effective coordination with other EU, national, regional
or local funds was often affected by weak demarcation lines and insufficient mechanisms to ensure
complementarity. The risk of deadweight was not
effectively mitigated, though some good practices
were identified;
— selection procedures did not always direct funding towards the most cost‑effective projects, the
risk of excessive project costs was not effectively
limited and the sustainability‑related requirements did not take into account the useful life of
investments. Long delays in the administrative
processes, especially with regard to the approval
of grant applications, also impacted the measures’
efficiency and effectiveness;
— the monitoring and evaluation system did not
produce adequate information. While the audited
projects delivered the expected physical output,
reliable information on what has actually been
achieved with the public funds spent was often
unavailable, making it difficult to direct future
policy and manage the budget by results.
IV
III
Even though the individual audited projects delivered their expected physical outputs and, in some
cases, made a clear positive contribution to the rural
areas, the Court found that the Member States and
the Commission, acting through shared management, had achieved only limited value for money, as
aid was not systematically directed towards the most
cost‑­effective projects addressing the objectives set
in the RDPs and there was insufficient information to
demon­strate the success or otherwise of the measures.
The Commission did not offer sufficient guidance to
Member States at the start of the 2007-2013 programming period. Since 2012, the Commission has adopted
a more proactive and coordinated approach. If the
changes are implemented properly, this should lead to
better financial management in the 2014-2020 programming period. However, certain weaknesses concerning the coordination of funds and performance
information are likely to persist.
Executive summary
V
The Court believes that significantly more can be
achieved with the given financial resources and recommends that:
(a) The Member States should have a coordinated approach for supporting rural infrastructure, which
quantifies needs and funding gaps and justifies
the use of the RDP measures. They should make
better use of the existing coordination structures.
(b) The Commission should build upon the first steps
taken to ensure effective coordination and carry
out a thorough assessment of the complementarity between the different EU funds to be used
by Member States in the 2014-2020 programming
period.
(c) Member States should establish and consistently
apply criteria to ensure the selection of the most
cost‑effective projects 4, take into account the useful life of the investments when establishing the
sustainability‑related requirements and checks,
and set a reasonable timeframe for processing
grant and payment applications and respect it.
(d) For the 2014-2020 period, the Commission and the
Member States should collect timely, relevant and
reliable data that provides useful information on
the achievements of the projects and measures
financed.
(e) Member States should ensure that clear, specific
objectives are set for the projects to which funds
are committed.
4
See Special Report No 22/2014 ‘Achieving economy: keeping the
costs of EU-financed rural development project grants under control’
(http://eca.europa.eu).
08
09
Introduction
The importance of rural
infrastructure
investments in the
European Union
01
Rural areas face significant challenges,
such as depopulation and a scarcity
of economic opportunities. Good
infrastructure (roads, water supply,
sewerage systems, flood prevention
systems, irrigation pipes, etc.) helps
to boost economic growth and to increase the attractiveness of rural areas.
The Community strategic guidelines,
adopted by the Council in 20065, identify the European Union’s priorities
under the European Agricultural Fund
for Rural Development (EAFRD). The
guidelines emphasised the importance
to be attached to the upgrading of
local infrastructure in the 2007-2013
programming period:
‘Significant investment will be undertaken in major telecommunications,
transport, energy and water infrastructure over the coming years. Considerable support will be available from
the Structural Funds, ranging from
trans‑European networks to the development of connections to business or
science parks. For the multiplier effect
to be fully realised in terms of jobs and
growth, small‑scale local infrastructure,
supported within rural development
programmes, can play a vital role in
connecting these major investments to
local strategies for the diversification
and development of agricultural and
food‑sector potential.’
Rural development
support for infrastructure
investments
5
Council Decision 2006/144/EC
of 20 February 2006 on
Community strategic
guidelines for rural develop­
ment (programming period
2007 to 2013) (OJ L 55,
25.2.2006, p. 20) sets out the
Community priorities for rural
development, as required by
Article 9 of Council
Regulation (EC) No 1698/2005
of 20 September 2005 on
support for rural development
by the European Agricultural
Fund for Rural Development
(EAFRD) (OJ L 277, 21.10.2005,
p. 1).
6
Under the ‘N+ 2 rule’, the
Member States can incur
expenditure for the 2007-2013
programmes until the end of
2015.
02
Some 13 billion euro, amounting to
13.5 % of the total EAFRD funding,
were allocated to infrastructure investments in the 2007-2013 programming
period (see Annex I). The total public
expenditure programmed by Member
States in their RDPs, including national
co‑financing, was 19 billion euro, of
which almost 12 billion euro had been
spent by the end of 2013. Although
2013 corresponds to the end of the
programming period, this is not the
end of its implementation, which
extends until 31 December 20156.
Taking into account the beneficiaries’
own contributions, the total volume of
investment is expected to reach nearly
29 billion euro.
03
The main measures chosen by the
Member States to support infrastructure under their RDPs in the 20072013 programming period were the
following:
— measure 125: ‘Infrastructure
related to the development and
adaptation of agriculture and
forestry’;
— measure 321: ‘Basic services for the
economy and rural population’;
— measure 322: ‘Village renewal and
development’;
— measure 323: ‘Conservation and
upgrading of the rural heritage’.
The abovementioned measures will be
referred to in this report as ‘infrastructure measures’.
10
Introduction
04
Box 1
The EU rural development regulation
applicable to the 2007-2013 programming period sets neither the maximum
eligible amount nor the maximum aid
rate for projects under these measures. Member States determine these
elements in their RDPs, in accordance
with EU state aid rules. The standard
aid rates are usually high, and ranged
from 70 % to 100 % in the RDPs
­audited. Box 1 gives typical examples
of the projects funded under each of
these measures, which were mainly
used by public beneficiaries, but were
also open to private beneficiaries.
Examples of projects funded by the rural infrastructure measures
Farm roads in Italy (Sicily)
(measure 125, private beneficiary)
Eligible cost: 1 330 000 euro
Aid rate: 80 %
Extension of a day care centre in Germany (Saxony)
(measure 321, public beneficiary)
Eligible cost: 145 000 euro
Aid rate: 100 %
11
Box 1
Introduction
Construction of a water supply and sewerage
system in Romania (measure 322, public
beneficiary)
Eligible cost: 2 200 000 euro
Aid rate: 100 %
Restoration of a rural path for livestock in Spain
(Extremadura) (measure 323, public beneficiary)
Eligible cost: 120 000 euro
Aid rate: 100 %
Source: European Court of Auditors.
05
Depending on the measure under
which they are supported, infrastructure projects should contribute either
to the objective of improving the
competitiveness of the agriculture
and forestry sector (measure 125) or to
the objective of improving the quality of life in rural areas (measures 321,
322 and 323). Infrastructure projects
contributing to the same objectives
could also be implemented following
a bottom‑up (‘LEADER’) approach7.
06
The regulatory framework for allocating EAFRD funding to infrastructure
projects is based on shared management. Under this system, the Member States submit their RDPs for the
Commission’s approval. The Commission’s role is to supervise the proper
functioning of the management and
control systems in Member States and
ensure the respect of the principles of
sound financial management8. Based
on the approved RDPs, Member States
select the projects to be funded.
7
A method to achieve the
objectives of the EU’s rural
development policy through
bottom-up implementation
rather than the traditional
top-down approach.
8
See Article 73 of Council
Regulation (EC) No 1698/2005.
12
Introduction
07
Figure 1
Figure 1 shows how funding is allocated to infrastructure projects. The
different steps are intended to ensure
that funding is directed to the projects
that best match the overall policy objectives while meeting the needs and
priorities established at Member State
or regional level.
08
The EU regulation for the 2014-2020
programming period9 broadly retains
the legal requirements set for the
2007-2013 programming period with
regard to the audited measures and
operations. Member States have earmarked more than 14.65 billion euro
for infrastructure measures in the
2014-2020 programming period. Thus,
the findings, conclusions and recommendations presented in this report
are also relevant for the 2014-2020
programming period.
9
Regulatory framework for allocating EAFRD funding to projects
Rural development policy established at EU level
(Community strategic guidelines, Council regulation)
Proposed by the Commission and approved by the Council
Strategic programming at Member State level
(National strategy plan, rural development programme)
Proposed by the Member States and approved by the Commission
Detailed rules and procedures at Member State level
(National or regional legislation, procedures, guides)
Project selection
Funding allocated to rural infrastructure projects
Source: European Court of Auditors.
Regulation (EU) No 1305/2013
of the European Parliament
and of the Council of
17 December 2013 on support
for rural development by the
European Agricultural Fund
for Rural Development
(EAFRD) and repealing Council
Regulation (EC) No 1698/2005
(OJ L 347, 20.12.2013, p. 487).
Audit scope and approach
09
The audit sought to answer the following question:
Have the Member States and the Commission achieved value for money with
the support for rural infrastructure
investments?
12
The audit focused on infrastructure
investments financed under measures 125, 321, 322 and 323. Projects
financed using the LEADER approach
were audited in Germany (Saxony)
and Spain (Extremadura), as these two
regions used this approach for significant infrastructure investments.
10
The Court assessed the justification
of the need for EU funds for rural
infrastructure and the coordination
with other funds (Part I of the report).
Several key aspects related to the
Member States’ implementation of the
measures were further analysed: the
application of selection criteria, the
checks on the reasonableness of costs,
the sustainability‑related requirements
and the timeliness of the administrative processes (Part II). The Court also
assessed whether the results of the
measures had been monitored and
evaluated in such a way as to allow the
Member States and the Commission to
identify and respond to any problems
which may have arisen, and to provide
objective information on the results of
the measures financed (Part III).
11
The audit, which was carried out between November 2014 and June 2015,
concerns the design and implementation of the infrastructure measures in
the 2007-2013 programming period.
Where possible, the changes in place
for the programming period 20142020 were also covered by the Court’s
assessment. Audit visits were made to
the Commission and to five Member
States, selected on the basis of the
significance of the amounts allocated
to rural infrastructure10. These Member
States were: Germany (Saxony), Spain
(Extremadura), Italy (Sicily), Poland and
Romania.
13
In terms of project types, the audit
concentrated on rural roads, water
management infrastructure and social
and cultural infrastructure, as these are
the main project categories supported
under the relevant measures.
14
The audit analysed the systems used
by managing authorities and/or paying agencies to implement support
for infrastructure projects, as well as
the key management information
derived from Member States’ control
and monitoring activities. This entailed
the examination of 48 project files,
selected as a sample of infrastructure
projects typical of those financed in
the Member State concerned. Site
visits, involving interviews with the
beneficiaries, were made to 32 of
these projects, while the remaining
16 project files were checked through
a documentary review. More information about the projects visited can be
found in Annex II.
13
10 See Annex I for detailed
financial figures on
programmed and realised
expenditure per Member
State.
14
Observations
Part I — Insufficient
justification for using EU
rural development funds
and weak coordination
with other funds
15
Infrastructure investments in rural
areas can receive funding from several
sources. At EU level, in addition to the
EAFRD, the European Regional Development Fund (ERDF) and the Cohesion
Fund may also finance rural infrastructure. The Member States often
finance such projects from their own
national, regional or local ­budg­­ets,
either through dedicated programmes
(organised in a similar way to the
RDP measures) or through the ­direct
allocation of funds, for example
through a specific budget line for road
maintenance.
16
Furthermore, private beneficiaries may
be able to cover at least part of the
costs of some infrastructure projects,
as they are the main users of investments such as rural roads and irrigation systems that are likely to improve
their economic performance. For water
supply and sewerage systems, some
investment costs are normally recovered from the fees paid by users.
17
In order to achieve optimum value for
money, Member States should identify the rural development needs and,
from among these, the main priorities.
After considering all possible interventions that could be financed by the
various funds, Member States should
decide strategically which funds are
best suited to addressing needs and
coordinate their use.
18
Funds can be coordinated effectively
by setting demarcation lines (minimising funding overlaps) and ensuring
complementarity (minimising funding gaps and encouraging synergies).
Potential funding gaps in rural areas
are particularly detrimental when they
occur with infrastructure projects,
given that infrastructure generally
operates as a network of interconnected elements (e.g. roads, irrigation
networks, water supply and sewerage,
power grids), in which each element is
important for the effective operation
of the entire network. Figure 2 shows
a simplified example of how better coordination in a given sector or territory
can lead to improved results.
15
Figure 2
Observations
Coordination of funds in a given sector or territory
ARBITRARY ALLOCATION
OF FUNDING
IN THE ABSENCE
OF COORDINATION
Fund
3
CLEAR DEMARCATION
EXISTS, BUT
COMPLEMENTARITY
IS NOT ENSURED
Fund
3
Fund 1
EFFECTIVE COORDINATION
ACHIEVED
COMMON
OBJECTIVE
Fund 1
Fund 1
Fund
3
Fund 2
Fund 2
Fund 2
Need
not
addressed
• Risk of funding overlaps
• Risk of funding gaps
• No synergies
Need
not
addressed
Fund 4
• Risk of funding overlaps
is mitigated
• Risk of funding gaps persists
• No synergies
• Risks of funding overlaps
and gaps are mitigated
• Synergies achieved
Source: European Court of Auditors.
19
The implementing rules for the 20072013 EU rural development regulation
required Member States to include
demarcation criteria and information
about complementarity with other EU
funds in their RDPs11, but there was no
similar requirement with regard to the
Member States’ own funds and support programmes.
Member States did not
always clearly justify
the need for the EU rural
development funds
20
A first step in justifying the need for
EU rural development funds (RDP intervention) is to identify and quantify
the need for investments in rural infrastructure. The audited RDPs explained
why support was needed for infrastructure in rural areas. For example,
the Polish RDP stated that ‘some flood
protection facilities only fulfil their
tasks to a limited extent, and restoring
their full technical capacity may require modernisation or rebuilding’ and
listed the facilities concerned (such
as water tanks with a total capacity of
35 000 m3 and 180 pumping stations).
However, in general, the audited Member States did not attempt to quantify
these needs in terms of the financial
resources required to address them.
11 Article 5(1) of Commission
Regulation (EC) No 1974/2006
of 15 December 2006 laying
down detailed rules for the
application of Council
Regulation (EC) No 1698/2005
on support for rural
development by the European
Agricultural Fund for Rural
Development (EAFRD) (OJ
L 368, 23.12.2006, p. 15).
16
Observations
21
After assessing their investment needs,
Member States should identify the
resources available to address those
needs (the existing EU funds, national,
regional and local public funds, as
well as private funds) and quantify the
funding gap to be covered by EU rural
development funds.
22
The RDPs of all the audited Member
States referred to other EU funds supporting similar projects. This is a legal
requirement, checked by the Commission before approving the RDPs.
Other Member State or private funding
sources addressing the same needs
were, however, not mentioned or
quantified. Only one RDP (Romania) referred to a national programme funding cultural establishments. Despite
neglecting to mention them in the
RDP, the audit found that the Member
States actually had many public programmes and funds dedicated to rural
infrastructure.
23
In the absence of a strategy which
coordinates all the potential funding
sources and quantifies needs and the
resulting funding gap, the justification
for RDP intervention is weak. In this
instance, substitution of funds is more
likely to occur, whereby Member State
funds earmarked for infrastructure projects are replaced by RDP funds, thus
entailing the risk of compromising the
added value of the EU intervention.
24
In two of the Member States audited,
there were indications that substitution of public funds had occurred
(see Box 2).
17
Box 2
Observations
Indications of the substitution of national and regional funds with RDP funds
Italy (Sicily)
In 2000, when EU funds became available for road projects in rural areas, Italy (Sicily) cancelled its own budget
for financing the maintenance of local and farm roads.
Germany (Saxony)
Since 2007, when RDP funds became available for rural road projects, the provision of national and regional
funds for such projects has decreased substantially. As shown in the graph below, while the total funding allocated to rural roads has remained relatively stable at between 140 and 160 million euro per year, the decrease
in the national and regional funds has been offset by an increase in RDP funding (see Figure 3).
Figure 3 — Allocation of funds for rural roads in Germany (Saxony)
180
Sum of national,
regional and RDP funds
160
million euro
140
120
National and regional
funds
100
RDP funds
80
60
40
20
0
2007
2008
2009
2010
The risk of deadweight was
not effectively mitigated,
though some good practices
were identified
25
Just as entire budget lines can be
replaced with the RDP measures, substitution of funds can occur at project
level, without any additional effect
on the outcome achieved. The risk of
deadweight refers to the likelihood
that a beneficiary would have undertaken the investment even without the
grant funding. The primary means of
reducing the risk of deadweight is to
design the measures in such a way as
2011
2012
2013
Source: European Court of Auditors
to direct RDP support to where there is
a funding gap, for example to sectors
or types of projects providing public
goods but for which the financial returns are insufficient to justify the full
costs of the investment.
26
The high aid rates set for infrastructure measures by the audited Member
States were not backed by an analysis
assessing the appropriate level of
public funding needed to encourage
investments while, at the same time,
mitigating the risk of deadweight.
18
Observations
27
Box 3
Only in Germany (Saxony), for the
2014-2020 programming period, did
the Court find an economic rationale
behind the setting of aid rates for
measure 125. Following the recommendation arising from the 2010
mid‑term evaluation to differentiate
the aid rates under this measure on
the basis of the profitability of the
forest holdings, the managing authority decided to revise the aid rates from
a standard 80 % for all holdings to
a differentiated aid rate based on the
size of the holdings, as a proxy for their
profitability. Larger holdings (above
200 ha) would receive an aid rate of
75 %, while smaller holdings (up to
200 ha) would receive 90 %.
28
Still, the audit identified an example
of good practice in directing RDP
support to where it is most needed.
Romania (under measure 322), Poland
(under measures 321 and 322/323) and
Italy (Sicily) (under measure 125) used
selection criteria to prioritise projects
submitted by communities with high
poverty rates and/or located in remote
areas (Box 3 shows an example of this).
Directing RDP support to poor areas
Romania
One of the selection criteria used under measure 322 assigned 10 out of a maximum of 100 scoring points to
communes with high poverty rates (i.e., rates between 60 % and 89.6 %). Communes with a medium poverty
rate (between 40 % and 59.9 %) obtained 7 scoring points, and those with a low poverty rate (< 40 %) obtained 5 points. Poverty was defined and calculated according to a methodology provided by the World Bank
and the national authorities, based on the welfare of a household.
29
Member States can also mitigate the
risk of deadweight through the project
selection process, by checking, where
appropriate before approving applications for support, whether the applicant had sufficient capital or access
to capital to finance all or part of the
project. The audit found that four out
of the five Member States audited did
not check the applicants’ capacity to
finance the projects from their own
funds or other public programmes
(see Box 4).
19
Box 4
Observations
Granting RDP funding to projects that had access to other funds
In Italy (Sicily), one of the audited projects concerning public water infrastructure had already been included
in the beneficiary’s investment plan before the submission of the application for RDP support and was to be
funded from the beneficiary’s own resources. The project was nevertheless approved for RDP funding. Similarly, another water infrastructure project had already been approved for funding under the national irrigation
plan at the time of its approval under the RDP. The RDP approval was subsequently withdrawn; nonetheless,
these examples show that funds are used interchangeably and some of the projects would probably have
been implemented even in the absence of the RDP funds.
In Spain (Extremadura), an audited project with an estimated cost of 11 million euro involved the creation
of a 145 km road network to improve the access to 1 629 agricultural holdings. Although the roads were likely
to increase the value of the private land and the farms’ economic performance, the authorities approved
the project, granting a 100 % public aid rate, without checking whether the private beneficiaries could have
borne part of the project costs. Similarly, an audited project of 1 million euro, involving the upgrade of an irrigation network to reduce water losses, received a 90 % aid rate without requiring the beneficiary (irrigation
community) to demonstrate its need for such a grant with reference to its financial capacity and the profitability of the investment. The beneficiary might, for example, have been able to finance a greater part of the
investment by increasing the tariffs paid by farmers for the water irrigation service12 or through a loan. These
ex­amples show that the managing authority not only set very high aid rates of the measures without an economic justification but also did not verify at project level the actual need for such high aid rates.
12 For similar findings, see Special Report No 9/2010 ‘Is EU structural measures spending on the supply of water for domestic consumption used to
best effect?’, in particular paragraphs 64 to 67, which state that ‘Member States tend to maximise EU financial assistance by keeping tariff levels
low’.
30
In Romania, an eligibility check was
carried out to ensure that the RDP
grant was needed. The check was
applied in the case of revenue‑generating operations, such as the provision
of water supply and sewage services, supported under measure 322.
However, in practice, the check had
limited relevance, as it was based on
unreliable assumptions regarding
the future revenues and expenditure
associated with the operation of the
infrastructure. For two of the three
water infrastructure projects audited,
the Court found that the actual tariffs
paid by users were respectively seven
times and nine times higher than the
beneficiary’s estimates indicated in
the project documentation, which had
been used to justify the need for support and received the approval of the
authorities.
20
Observations
Effective coordination of
funds was often affected by
weak demarcation lines and
insufficient mechanisms to
ensure complementarity
The demarcation criteria set
by Member States allowed
overlapping of public funds for
certain types of projects
31
As regards demarcation between the
different EU funds, the audit showed
that, although the Member States’
national strategy plans and RDPs
for 2007-2013 generally set out clear
demarcation criteria, these were not
always consistent with criteria from
other programming documents and
overlaps of funds were explicitly allowed in some cases:
— In Germany (Saxony), according to
the RDP, the demarcation between
the EAFRD and ERDF funds for
school modernisation projects was
based on the number of pupils:
the EAFRD only financed schools
of less than 350 pupils. However,
the ERDF operational programme
does not set a pupil threshold for
eligible projects.
— In Italy (Sicily), while the RDP
stated that the ERDF could only
fund infrastructure projects in
villages with more than 500 inhabitants, the ERDF operational
programme itself did not mention this demarcation criterion.
When visiting one of the audited
projects, the auditors found that
an ERDF‑funded project had been
carried out in a village of less than
500 inhabitants.
— In Poland, both the EAFRD and the
ERDF allowed for the financing
of infrastructure projects in rural
areas. Smaller projects were primarily financed under the EAFRD,
but could also be financed under
the ERDF if applicants had reached
their grant limit under the EAFRD
(which varied, depending on the
measure). 72 % of the sewerage
infrastructure projects approved
under the ERDF operational programme were implemented by the
same beneficiaries that had used
EAFRD funds for the same type of
projects.
32
Moreover, there was no demarcation
between EU rural development funds
and Member State funds for rural
infrastructure. There was no critical assessment of the arguments in favour of
having several funds acting independently to provide support for similar
projects, despite the fact that this led
to a duplication of management structures and required a greater effort to
ensure coordination between funds
and avoid double funding.
21
Observations
Complementary actions were
not actively promoted
33
Box 5
Four out of the five audited Member
States set up coordination bodies to
supervise the spending of EU funds
and in two Member States representatives of the managing authorities of
other EU funds participated in the rural
development monitoring committees.
However, no evidence was available to
show how this helped ensure better
complementarity between funds, i.e.
by filling funding gaps and operating
in synergy in order to achieve common
objectives. Although the term ‘complementarity’ was mentioned in Member
States’ RDPs and during high‑level
meetings, it was often misused to refer
to demarcation and the rules aimed at
avoiding double funding.
34
Complementarity could have been
encouraged by, for example, using
different funds to prioritise successive projects that build upon each
other or parallel projects that complement each other in order to achieve
additional benefits. The audit only
identified one mechanism aimed at
promoting complementarity in the
Member States audited: in Romania,
selection criteria used under measure
322 prioritised sewerage infrastructure
projects that complemented projects
supported under the Cohesion Fund
with the aim to achieve the objectives
of the waste water directive.
35
The common approach taken by Member States was to leave it up to the potential beneficiaries to coordinate their
use of the different funds (see Box 5).
An example of the alternate use of funds based on availability
Germany (Saxony)
A commune in Germany (Saxony) used several funds (national, own funds and RDP funds) to support the consecutive stages of a school renovation project from 2009 to 2011. The RDP funds were used for the same type
of investment as the national funds, e.g. the replacement of school windows. This does not represent complementarity, but rather the practice of switching between different funds, depending on their availability.
Source: European Court of Auditors.
22
Observations
36
Box 6
The audit identified two cases where
the lack of complementarity with
national and local funds jeopardised
the efficiency and effectiveness of the
EAFRD projects (see Box 6).
Examples of a lack of complementarity between funds
Romania
In a commune that had received RDP support for building a network of roads, the main road leading to these
financed roads was in very poor condition. The main road was supposed to be upgraded with local funds,
but never received the approved funding.
Roads financed
by measure 322
Road section
approved for
financing from
national funds
Source: www.geoportal.gov.ro
Source: European Court of Auditors.
Italy (Sicily)
One of the audited projects involved building a new road as an alternative to an existing communal road
that had become unusable through lack of maintenance. The road had fallen into disrepair because communal roads were not eligible for RDP support and the region’s own budget for road maintenance had
been cancelled (see Box 2). Building a new road rather than regularly maintaining an existing one is clearly
inefficient13 and reveals a gap between the funds, which do not complement each other.
13 Recent studies and reports on this topic include the following: Smart Growth America and Taxpayers for Common Sense, ‘Repair priorities:
transportation spending strategies to save taxpayer dollars and improve roads’, 2011; McKinsey Global Institute, ‘Infrastructure productivity:
how to save $1 trillion a year’, 2013; European Parliament, Directorate-General for Internal Policies of the Union, ‘EU road surfaces: economic
and safety impact of the lack of regular road maintenance’, 2014.
23
Observations
The Commission focused on
improving coordination in
the 2014-2020 programming
period in order to address
the weaknesses of the past
37
Responsibility for justifying the need
for RDP intervention and ensuring
good coordination between funds
lies mainly with the Member States.
However, the Commission has the
power to influence these processes
at the programme approval stage,
when it reviews the needs analysis
and the demarcation and complementarity principles set out by the
Member States. The Commission can
also intervene indirectly during the
implementation of the programmes,
by issuing guidance, promoting good
practice and participating in monitoring committee meetings, where it has
an advisory role14.
38
In the 2007-2013 programming period,
the Commission approved the RDPs
submitted by the Member States, even
though they lacked a clear justification and quantification of the need
for using the EAFRD for infrastructure investments. The Commission
generally insisted that the audited
measures had to be better targeted,
that demarcation criteria be set, that
cross‑checks be performed to avoid
double funding and that coordination
bodies be set up. However, it accepted
overlaps of funds for the same types
of intervention (see paragraphs 31 and
32) and issued no guidance to Member States on how to achieve better
complementarity.
39
In the 2014-2020 programming period,
improving coordination and ensuring
consistent implementation of the various funds were among the main goals
behind drafting a single set of rules
covering the EU’s five Structural and
Investment Funds. These rules highlight the importance of greater consistency between the EU funds. The new
approach focuses less on demarcation
and more on complementarity. A positive element for rural infrastructure
is the fact that the measure ‘basic
services and village renewal’ can now
also offer support to the development
plans for municipalities and villages,
thus encouraging them to carry out
investments in a coherent way.
40
The Court reviewed the checklist used
by the Commission to ensure the
consistency of the 2014-2020 RDPs.
The checklist included points that
refer to the complementarity of the
EU’s Structural and Investment Funds
in the areas of local roads, irrigation
and water treatment; however, it did
not include any checks on the risk of
substitution of funds.
14 Article 77(2) and Article 78 of
Council Regulation (EC)
No 1698/2005 state that ‘At
their own initiative,
Commission representatives
may participate in the work of
the Monitoring Committee in
an advisory capacity’, and that
‘The Monitoring Committee
shall satisfy itself as to the
effectiveness of the
implementation of the rural
development programme’.
This is done by considering
and revising selection criteria,
monitoring progress toward
objectives, the achievement of
targets, etc.
24
Observations
41
As highlighted in the Court’s 2014 annual report15, partnership agreements,
as the key mechanism for coordinating
EU funds, have provided little evidence
that the aims of complementarity and
synergy are being put into practice by
Member States. Furthermore, despite
the Commission’s checks, the 20142020 RDPs for Germany (Saxony), Poland and Romania16 still do not provide
a description of the mechanisms to
be used to promote complementarity
and synergies between the different
sources of funding. The focus of the
programmes remains on demarcation
and avoiding double funding.
Part II — Limited value for
money in the
implementation of the
measures audited
42
In order to achieve value for money17,
Member States should:
— apply selection methods that
prioritise the most cost‑effective
projects, i.e. the projects with the
potential to make the greatest contribution towards the RDP objectives per unit of cost;
— ensure that costs are reasonable
before approving grant applications and payment claims;
— ensure, before approving grant
applications, that applicants have
been able to show that their projects are likely to be sustainable;
— ensure that the administrative
procedures allow projects to be
implemented within a reasonable
time frame.
The Commission, through its guidance
and audit activities, should ensure that
Member States observe the principles of
sound financial management (economy,
efficiency and effectiveness).
Selection procedures
did not always direct
funding towards the most
cost‑effective projects
43
To ensure that funding is directed
towards the RDP objectives, Member
States must set out the conditions
for eligibility — which identify, for
ex­ample, the types of investments
supported, the categories of beneficiaries that can apply for a grant and
the nature of the support. The Court
found that the eligibility criteria set by
the audited Member States were generally clear and objective. However,
a specific case was identified in Italy
(Sicily) where an eligibility criterion
applicable to rural road projects supported under measure 125 was not in
line with the needs described in the
RDP (see Box 7).
15 The findings presented in the
annual report are based on
a sample of five partnership
agreements: those of
Germany, France, Latvia,
Poland and Portugal.
16 The 2014-2020 RDPs for the
remaining two regions
audited (Spain (Extremadura)
and Italy (Sicily)) have not been
reviewed because they had
not yet been approved by the
date of the audit.
17 In accordance with the
principles of economy,
efficiency and effectiveness
set out in Article 30(2) of
Regulation (EU, Euratom)
No 966/2012.
25
Box 7
Observations
An eligibility criterion inconsistent with the RDP objectives and needs of rural areas
Italy (Sicily)
Although the RDP indicates that projects supported under measure 125 should favour the rehabilitation of
existing farm roads, the eligibility criteria set in the call for proposals required that a maximum of 40 % of the
eligible project costs was spent on rehabilitation, while the remaining 60 % had to be spent on building new
roads. This requirement resulted in the financing of some projects which did not match the needs of the rural
areas as identified in the RDP.
For example, in one of the audited projects, the initial section of the existing access road was in bad condition
and would have warranted rehabilitation, yet it was not included in the project to keep the costs for rehabilitation under 40 % of the eligible project costs. On the other hand, around one third of the length of the newly
built road served only two out of the 31 farms included in the association which implemented the project, i.e.
only 5.5 % of the total agricultural land owned by the association.
44
Whereas eligibility criteria should
exclude projects that do not address
the RDP objectives, selection criteria
should enable the relative merits of
project proposals to be evaluated on
an objective and transparent basis, so
that Member States spend the available budget on those projects that
contribute most to the objectives. For
instance, all else being equal, if one
water infrastructure project connects
more users than another project,
or generates higher water savings,
it should be prioritised, if this is in line
with the Member State’s strategy for
developing infrastructure. Effectively
applying selection criteria is a requirement of the relevant EU legislation18.
Therefore, even in cases when the
budget is sufficient to approve all eligible projects at a given time, Member
States should set a minimum score (a
threshold) that projects would have to
reach in order to be selected.
18 Article 71(2) of Regulation (EC)
No 1698/2005 states that:
‘Expenditure shall be eligible
for EAFRD contribution only
where incurred for operations
decided on by the Managing
Authority of the programme
in question or under its
responsibility, in accordance
with the selection criteria fixed
by the competent body.’
26
Figure 4
Observations
Targeting the aid through an effective selection process
PROJECT
APPLICATIONS
Eligibility criteria
EXCLUDING
IRRELEVANT PROJECTS
ELIGIBLE
PROJECTS
Selection
criteria
SELECTING
THE BEST PROJECTS
BEST PROJECTS
ADDRESSING
RDP OBJECTIVES
Source: European Court of Auditors.
45
The Member States audited either did
not set selection criteria or, if they did
do so, the criteria set did not always
lead to actual prioritisation of projects
in relation to the RDP objectives. This
happened in cases where the budget
programmed for the measures was
sufficient to support all eligible project
applications and where the selection
criteria were not relevant for the RDP
objectives.
46
In Germany (Saxony) and Spain (Extremadura), the project selection process was insufficiently documented,
not based on specific selection criteria
and did not produce a ranking of projects (see Box 8).
27
Box 8
Observations
Examples of non‑transparent and unverifiable project selection procedures
hindering the selection of the most cost‑effective projects
Spain (Extremadura)
Projects representing 73 % (i.e. 49 out of 67 million euro) of the funds spent under infrastructure measures 125
and 323 were managed directly by the regional administration. The managing authority collected project
proposals (prepared on its own initiative or following the informal requests of municipalities) and subsequently approved projects in a non‑transparent and unverifiable way. The selection procedure was not based on
specific selection criteria and did not result in a ranking of projects.
Germany (Saxony)
The selection of projects under measures 321 and 322 was generally19 carried out at two subsequent levels:
first at local level by ‘coordination groups’, and then at central level by the managing authority. The managing
authority provided coordination groups their own dedicated budget under which they could fund projects.
Project applications could be passed on to the central level only if they received a positive vote from the coordination group. The decision process of the coordination groups was insufficiently documented and did not
result in a ranking of project applications. The managing authority approved all eligible projects with a positive vote from the coordination groups, as sufficient funds were available under these measures.
19 Only in exceptional cases (e.g. temporary direct funding for school projects) was project selection carried out directly at central level by the
managing authority.
47
Poland did not set selection criteria
under measure 125, which finances
water infrastructure to protect agricultural land from floods. All eligible
projects were approved on the basis of
the ‘first come, first served’ principle.
In this context, the managing authority
did not prioritise the most cost‑effective projects; for example, two projects
were both approved although their
cost‑effectiveness ratio was vastly different (150 euro compared to almost
10 000 euro of public support per
protected ha).
48
Examples were identified where selection criteria were established (in Italy
(Sicily), Poland and Romania). However,
in Italy (Sicily), the selection criteria
were effectively applied only under
sub‑measure 125-A, as all eligible
projects were approved under the
other audited measures. In Poland and
Romania, the selection criteria were
generally in line with RDP objectives
and a minimum threshold was used to
ensure the quality of the selected projects. However, the selection criteria
were not always related to the projects’ contribution to the RDP objectives (see Box 9).
Box 9
Observations
28
Examples of selection criteria which did not prioritise the projects based on their
contribution to RDP objectives
Poland
A selection criterion used under measures 322/323 was designed to first promote larger projects and then
(later in the programming period) smaller projects, with the aim of ‘ensuring balanced access to EU funds’.
This was not stated in the RDP.
Italy (Sicily)
Under sub‑measure 125-B, which finances irrigation systems, the selection criteria were not quantifiable and
did not prioritise projects aimed at saving water in areas where there was a greater need to reduce water
losses. This led to the high ranking of projects in areas not affected by water shortages and the low ranking of
projects in areas affected by a serious lack of water.
Romania
A selection criterion under measure 322 prioritised applicants that had not previously received EU support
for a similar investment, although this criterion did not reflect the extent to which the project met the RDP
objectives.
49
Box 10
Cost‑effectiveness criteria prioritising
projects offering the highest value for
money were identified only in Germany (Saxony) (see Box 10), although
these were not applied in practice.
An example of cost‑effectiveness criterion being set, but not applied in practice
Germany (Saxony)
Under measure 125, the German authorities set four selection criteria, to be applied to the population of
eligible projects in the case of insufficient budget. One of them was a simple cost‑effectiveness ratio which
prioritised projects costing less per linear metre of forest road built. However, once the deadline for receiving
project applications had elapsed (towards the end of the 2007-2013 programming period), additional funds
were shifted to measure 125. With sufficient budgetary resources available, all applications were granted
funding, and so the ranking produced using this selection criterion was never put into effect.
29
Observations
Checks on the
reasonableness of costs
and public procurement
procedures did not
effectively limit the risk of
excessive project costs
50
High aid rates, which are common in
infrastructure measures, result in little
or no risk for project promoters. This
reduces their incentive to limit the project costs. It is therefore particularly
important that Member States establish proportionate requirements and
checks for ensuring reasonableness of
costs. The Member States audited generally relied on the use of reference
prices and public procurement proced­
ures to ensure the reasonableness of
the investment costs20. However, these
tools were not adequately applied,
as the Court has already noted in its
previous reports21. Details of the main
weaknesses identified by this audit are
provided below.
51
Although widely used, the systems
based on reference prices had serious limitations, mainly because the
reference prices were provided by
construction companies and were
thus likely to overstate the real market prices following negotiations or
competitive tenders. In Spain (Extre­
madura), Italy (Sicily) and Poland, the
audit identified that average savings of
30 % to 40 % compared to the reference prices were normally obtained
following a tender procedure.
52
Only in Romania were reference prices
established on the basis of actual
transactions between the government
and construction companies. Prices
were, however, available only for a limited range of public works and had not
been updated since 2009. The managing authority of Germany (Saxony)
automatically accepted deviations of
up to 50 % compared to the reference
prices, without performing further
inquiries.
53
While the risk of using inflated reference prices may be mitigated when
the final costs are established based
on a fair, competitive tender, there is
no safeguard for projects that are not
subject to a competitive tender (as
is the case for certain measures and
bene­f iciaries in Spain (Extremadura)
and Italy (Sicily)) and in cases where
the public procurement procedures
are affected by serious weaknesses.
54
The audit identified several such
weaknesses that hindered fair competition and the reasonableness of costs
(see Box 11).
20 Article 24(2)(d) of Commission
Regulation (EU) No 65/2011 of
27 January 2011 laying down
detailed rules for the
implementation of Council
Regulation (EC) No 1698/2005,
as regards the implementation
of control procedures as well
as cross-compliance in respect
of rural development support
measures (OJ L 25, 28.1.2011,
p. 8) specifies that Member
States should verify the
reasonableness of project
costs submitted as part of the
administrative checks on
applications for support. This
evaluation must be performed
using a suitable system, such
as reference costs, the
com­­­­parison of a number of
offers or an evaluation
committee. Furthermore,
Article 24(2)(c) of the same
regulation specifies that
Member States should check
the compliance of the
operation for which support is
requested with applicable
national and Union rules on, in
particular, and where relevant,
public procurement, State aid
and other appropriate
obligatory standards
established by national
legislation or established in
the rural development
programme.
21 ECA annual reports, Special
Report No 6/2013 ‘Have the
Member States and the
Commission achieved value
for money with the measures
for diversifying the rural
economy?’, Special Report
No 22/2014 and Special Report
No 23/2014, ‘Errors in rural
development spending: what
are the causes, and how are
they being addressed?’ (http://
eca.europa.eu).
Box 11
Observations
30
Examples of public procurement procedures that hindered transparency, fair
competition and reasonableness of costs
Spain (Extremadura)
The managing authority arbitrarily decided to award to a state‑owned construction company contracts for
18 % (i.e. some 14 million euro) of the allocation to measure 125. The managing authority justified this based
on the ‘urgency’ of the works, ‘specificity/type of works’ and ‘confidentiality’. However, the authorities could
not provide any evidence to support such justifications. The project costs were reimbursed based on a price
list agreed between the company and the national authorities. While this procedure may be quicker than
organising a tender, it does not ensure that the prices obtained are in line with market prices.
Even when formal tenders were organised, award criteria were in some cases insufficiently defined and
therefore unverifiable. This was the case of an audited project, having an estimated cost of 11 million euro,
for which 48 out of 100 scoring points were awarded based on vague criteria, such as ‘the knowledge of the
project, the area and the quality of the proposal’, ‘the respect of safety rules’, ‘the environmental measures’
and ‘other improvement proposed’.
Romania
The audit also identified poorly defined award criteria. For example, the ‘shortest duration of the works’ was
used as an award criterion in 9 out of the 11 projects reviewed, without indicating acceptable timeframes or
checking whether the proposed durations were realistic. The duration indicated in the winning offers and
subsequent contracts was largely exceeded in practice, with works lasting up to eight times longer than the
contractual term (24 months instead of 3 months). Adverse weather conditions could only partially explain
such delays.
Italy (Sicily)
Contracts for public works were awarded through competitive tenders using a methodology that resulted in
the automatic exclusion of the lowest offers22, which were disregarded as ‘abnormal’ without further analysis.
This procedure did not allow for selection of the most economical offer and, in general, does not provide an
incentive for the bidders to offer their lowest price.
22 In line with Article 86.1 of the Italian public procurement law 163/2006, this procedure consists of four steps: (1) excluding the top and bottom
10 % of the offers received; (2) calculating the average of the ‘rebates’ (i.e. discounts as compared to the estimated value of the contract) of the
remaining offers; (3) adding to this average the variance of the rebates which are above the average; and (4) awarding the tender to the offer
proposing a rebate just under the value of the rebate as calculated after step 3.
31
Observations
Sustainability‑related
requirements did not take
into account the useful life of
the investments
55
The sustainability of financed investments is a key factor in achieving
project and wider RDP objectives.
Sustainability is a particular concern
with infrastructure investments due
to their long expected useful life23,
the large number of users, the need
to ensure continued access to public
services and the high costs associated with both the initial investment
and subsequent maintenance. Various
studies have shown that the costs of
restoring infrastructure that has fallen
into disrepair are much higher than the
costs of retaining initial quality levels24.
The benefits of adequate maintenance
planning extend beyond financial
considerations, as they also have an
impact on the quality of life and safety
standards. The existence of an adequate maintenance plan and a dedicated budget are therefore vital to the
effectiveness of these investments.
56
None of the audited Member States
had asked beneficiaries to submit a detailed maintenance plan setting out
the regular and extraordinary maintenance requirements and costs. Bene­
ficiaries were not required to earmark
funds for maintenance or to indicate
the financing sources to be used.
57
In Romania, the national audit office
highlighted the potential unsustainability of RDP‑funded investments
in social and cultural infrastructure,
as, once the project is complete, the
beneficiaries may have difficulties in
financing the related activities from
the local budget. This risk was subsequently confirmed, as the beneficiaries
of more than half of the 191 projects
checked by the paying agency in 2014
could not prove that the activities
planned were actually carried out following the completion of the project.
58
The risk that project outputs and
results may not be sustainable was
also found in the case of rural roads
in Italy (Sicily), where the managing
authority intended to use the 20142020 RDP to support the rehabilitation
costs for roads which had been built
or re­habilitated using EU funds just
some 10 years earlier25. This suggests
that roads may have deteriorated
substantially in a relatively short
timeframe due to a lack of adequate
maintenance.
23 In its guide to the cost-benefit
analysis of investment projects
(published in July 2008), the
Commission indicated that for
the majority of infrastructures,
the time horizon over which
financial forecasts should be
made, and which should not
exceed the economic useful
life of the project, is at least 20
years. For example, the guide
sets the recommended time
horizon for road projects at 25
years and for water
infrastructure at 30 years.
24 Examples of such studies are
given in footnote 13.
25 This possibility was included in
the draft RDP for the
programming period
2014-2020, sent to the
Commission in July 2014
(section M04 — Investments
in physical assets (Article 17),
page 221).
Observations
59
Box 12
To ensure the durability of investments, the rural development regulation, Regulation (EC) No 1698/2005,
requires Member States to recover
the EAFRD contribution if an investment project undergoes a substantial
modification that ‘affects its nature
or implementation conditions’ within
5 years (known as ‘commitment
­period’) from the managing authority’s funding decision26. However, this
requirement is not differentiated by
type of investment. Only Germany
(Saxony), Italy (Sicily) and Romania
specified longer commitment periods for certain types of investment,
although the limited timeframe of ex
post checks weakened the incentive on
beneficiaries to respect their commitments (see Box 12).
32
26 Article 72 of Council
Regulation (EC) No 1698/2005.
Good practices implemented by Member States to ensure the sustainability of
infrastructure investments and their limitations
Germany (Saxony)
In the 2007-2013 programming period, there were differentiated commitment periods27 which ranged between 5 and 20 years after the completion of the project, depending on the type of project as well as on the
total eligible costs. These commitment periods were taken into account in the risk assessment leading to the
sampling of projects for the ex post checks, making it more likely that older projects would be sampled.
Another element favouring sustainable investments in schools was the requirement that applicants (communes) submit with their application a written confirmation from the Ministry of Culture and Sport that the
school concerned by the modernisation project is expected to remain in operation for 5 or 10 years.
Romania
As part of the eligibility conditions for measure 125 (that supports farm and forest roads and irrigation infrastructure), beneficiaries were required to commit to maintaining and repairing the financed infrastructure
throughout its entire useful life. Ex post checks during which this commitment could be checked are, however,
only performed for up to 5 years after the date of the grant agreement.
27 These commitment periods have been revised downwards in the 2014-2020 programming period to the standard 5-year period stated in
Article 71 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions
on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural
Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund,
the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No
1083/2006 (OJ L 347, 20.12.2013, p. 320).
33
Observations
60
The audited Member States generally
applied the 5‑year requirement and
used the ex post checks28 to verify that
the beneficiaries had respected their
commitments. Each year the ex post
checks cover at least 1 % of the eligible
public expenditure for investment
operations for which the final payment
has been made from the EAFRD. However, it is possible for the 1 % to be
reached by checks on just one project.
In addition, as in Poland and Romania
the commitment period of 5 years was
counted from the date of the funding
decision, it was reduced in practice to
much less time after the completion of
the project. For example, seven out of
the 10 projects audited in these two
Member States were completed more
than 2 years after the funding decision.
So, the ‘5 years’ requirement and the
corresponding checks had a reduced
relevance in practice in carrying out
their function to ensure the sustainability of the projects.
Long delays in the
administrative process
impacted the measures’
efficiency and effectiveness
61
To make EAFRD funding attractive to
potential beneficiaries and to allow
projects to generate timely benefits
for rural areas, administrative proced­
ures should not be excessively long
and burdensome.
62
Three (Italy (Sicily), Romania and Poland) out of the five audited Member
States set time limits for processing
project applications and final payment
claims. These limits were generally
between 1 and 4 months.
63
The time limits set by the Member
States for processing grant applications were exceeded for most of the
measures audited (see Figure 5)29. In
Germany (Saxony), Poland and Ro­
mania, it took 30 from 3.5 to 9 months
to process grant applications, while
the Italian (Sicilian) authorities needed
around 16 months to process applications under measures 125 and 321,
with extreme cases lasting more than
3 years. This was mainly due to the
excessive time required to perform the
required checks on the eligibility of
the beneficiaries.
64
Payment claims were generally processed quicker than grant applications;
however notable delays were again
incurred in Italy (Sicily) (see Figure 6).
28 Made in accordance with
Article 30 of Commission
Regulation (EC) No 1975/2006
of 7 December 2006 laying
down detailed rules for the
implementation of Council
Regulation (EC) No 1698/2005,
as regards the implementation
of control procedures as well
as cross-compliance in respect
of rural development support
measures (OJ L 368,
23.12.2006, p. 74).
29 For Spain (Extremadura), it was
not possible to calculate such
statistics as there was no
overview data available for all
approved projects under the
audited measures.
30 Median value: a value in an
ordered set of values below
and above which there is an
equal number of values (or
which is the arithmetic mean
of the two middle values if
there is no middle number).
34
Figure 5
Observations
Processing of grant applications (median value, in months)
Germany (Saxony)
Measure 125
Italy (Sicily)
Measure 321 *
Poland
Measure 322 **
Romania
0
2
4
6
8
10
12
14
16
18 months
*The information presented for Italy (Sicily) under measure 321 only applies to the audited sub‑measure, ‘Azione 2’; in Romania, measure 321 is
implemented jointly with measure 322.
**In Poland, measure 322 is implemented jointly with measure 323.
Figure 6
Source: European Court of Auditors, based on data provided by Member States.
Processing of payment applications (median value, in months)
Germany (Saxony)
Measure 125
Italy (Sicily)*
Measure 321
Poland
Measure 322
Romania
0
1
2
3
4
5
6
7
8 months
* In Italy (Sicily), only the data regarding the processing of final payment requests was used for the calculation; also in Italy (Sicily), information
regarding measure 321 was not available, as none of the approved projects had received its final payment by December 2014.
Source: European Court of Auditors, based on data provided by Member States.
35
Observations
65
The audit found that Romania had
devised a good practice in addressing
the main causes of delays and limiting the administrative burden on the
applicant. In order to speed up the
project submission and evaluation process, in the 2014-2020 programming
period the paying agency will allow
applications to be submitted online
in full (including all the supporting
documents), on an ongoing basis, and
selection reports will be published at
shorter intervals than in the previous
programming period.
The Commission started to
systematically follow up
weaknesses and related
Member States' action plans
late in the programming
period
66
In the 2007-2013 programming ­p eriod,
the Commission checked, mainly
through its conformity audits, whether
Member States were complying with
the legal requirements of applying
selection criteria, verifying the reasonableness of costs and following public
procurement rules. The scope of the
Commission’s audits did not include an
examination of performance aspects.
67
Consequently, the Commission’s audits
identified only a few of the above
weaknesses — mainly those with respect to the application of public procurement rules in Romania, which gave
rise to a financial correction31 in 2014.
Only in 2013 did the Commission start
to systematically follow up on actions
taken by Member States to address the
root causes of errors in rural development measures, including errors
related to the project selection system,
checks on the reasonableness of costs
and public procurement. As a result of
this exercise, out of the Member States
audited, only Italy (Sicily) and Romania
have introduced or are in the process
of developing new procedures that intend to tackle some of the weaknesses
identified. However, these changes arrived too late to have an influence on
the bulk of the expenditure incurred in
the 2007-2013 programming period.
68
Recognising past problems, the Commission has made changes for the
2014-2020 programming period, which
are intended to improve the situation.
69
On project selection, it is an explicit
requirement for the 2014-2020 RDPs
to include the principles guiding the
establishment of selection criteria. The
Commission issued guidance in March
2014 encouraging Member States to
ensure that eligibility and selection
criteria are applied in a transparent
and consistent way throughout the
programming period, that selection
criteria are applied even in cases when
the budget available is sufficient to
fund all eligible projects and that projects with a total score that is below
a certain threshold are excluded from
support.
31 Following its audit findings,
the Commission may launch
procedures whereby EU
funding for the Member State
concerned is reduced to
compensate for the
shortcomings identified.
These procedures are referred
to as ‘financial corrections’.
36
Observations
70
On public procurement, at the end
of 2014 the Commission developed
guidelines on how to avoid common
errors in EU co‑funded projects32.
In this document, the Commission
criticises the use of the ‘average pricing’ method, whereby tenders close
to the average for all tenders receive
more points than tenders deviating
from the average, as this method­
ology ‘represents unequal treatment
of tenderers, particularly those with
valid low tenders’. Further guidance
is given on ­topics such as the selection of the appropriate public procurement procedure, time limits and
selection and award criteria. Nevertheless, at the time of the audit, the ex
ante conditionality33 related to public
procurement had not been fulfilled by
Romania and it had only been partially
fulfilled by Italy (Sicily) and Poland. The
non‑fulfilment of this ex ante conditionality by the end of 2016 may lead
to a suspension of payments to Member States, as the Court has recently
recommended34.
71
The Commission organised a series of
workshops on the topic of reasonableness of costs and simplified cost options in 2014-2015. However, the issue
of setting and using reference prices
(see paragraph 51) was not addressed
in the guidance documents discussed
during these workshops.
72
The Commission has not taken any
specific action with regard to Member
States’ project sustainability requirements and checks.
Part III — The monitoring
and evaluation system did
not produce adequate
information on project
results
73
Performance information on the effectiveness and efficiency of rural
development spending is needed to
demonstrate what has been achieved
with the EU budget and to show that
it has been spent well (accountability).
Furthermore, it is used to improve the
efficiency and effectiveness of the EU
budget by guiding ongoing management of the measures, pointing to
possible improvements and helping
to shape future policy, for example by
revealing the types of investment that
performed well.
74
In order to show what has been
achieved with the EU budget spent on
rural infrastructure measures, Member
States should collect data on the outputs and results achieved by projects.
Under the common monitoring and
evaluation framework (CMEF), Member
States must collect information for at
least the following output and result
indicators (see Table).
32 ‘Public procurement guidance
for practitioners on the
avoidance of common errors
in ESI-Funded projects’.
33 Ex ante conditionalities have
been introduced by Articles 2
and 19 of Regulation (EU)
No 1303/2013 as prerequisites
for the effective and efficient
achievement of specific
objectives for Union priorities.
The ex ante conditionality on
public procurement refers to
’the existence of arrange­
ments for the effective
application of Union public
procurement law in the field
of the European Structural
Investment Funds’.
34 ECA Special Report No 10/2015
‘Efforts to address problems
with public procurement in EU
cohesion expenditure should
be intensified’, recommend­
ation No 2 (http://eca.europa.
eu).
37
Table
Observations
Overview of the compulsory output and result indicators under the CMEF for the
2007-2013 programming period1
Code
Measure
Output indicators
125
Infrastructure related to the development
and adaptation of agriculture and forestry
— Number of operations supported
— Total volume of investments
321
Basic services for the economy and rural
population
— Number of actions supported
— Total volume of investments
322
Village renewal and development
—
Number of villages where actions took
place
— Total volume of investments
323
Conservation and upgrading of the rural
heritage
—
Number of rural heritage actions
supported
— Total volume of investments
Result indicators
Increase in gross value added (GVA) in
supported holdings/enterprises
Population in rural areas benefiting from
improved services
1As regards rural development policy, the CMEF will be replaced in the 2014-2020 period by the ‘Common monitoring and evaluation
system (CMES)’. Details about the new system are provided from paragraph 85 onwards.
75
Given the co‑financing element, and
irrespective of the monitoring and
evaluation work required by the CMEF,
Member States have a vested interest in project monitoring, as this is
an important tool with which to keep
track of projects’ progress and to be
kept informed as to whether they are
achieving the expected results and the
RDP objectives. Monitoring could be
carried out by using the administrative and control information available
and by periodically collecting relevant
information from the beneficiaries35.
Member States can set additional,
programme‑specific indicators (within
or outside the CMEF system).
76
The Court examined the data collection and monitoring systems in the
Member States audited and found, as
in previous reports36, that there was
an absence of relevant and reliable
information to draw a conclusion on
the effectiveness of these measures.
Therefore, the auditors measured
project results and, where applicable,
the achievement of the specific project
objectives, on the basis of evidence
obtained from project visits. More information on the audited projects can
be found in Annex II.
35 At least until the expiry of the
5-year period for retaining
the assets determined by
Article 72 of Council
Regulation (EC) No 1698/2005.
36 See Special
Reports Nos 8/2012,
1/2013, 6/2013 and 12/2013
(http://eca.europa.eu).
38
Observations
The audited projects
delivered the expected
physical outputs, but reliable
information on project
results was often unavailable
77
78
By achieving the expected outputs,
some of the projects also automatically achieved their objectives in terms
of results, for example by improving
the flood protection of a certain area
(see Box 13).
Box 13
All 32 audited projects delivered
the expected physical outputs (e.g.
modernisation of a road, construction
of a sewerage system) and 20 of them
respected the deadlines indicated in
the grant agreement and/or in the
contract for works. The delays that
occurred were in certain cases partially
justified by bad weather conditions
or other circumstances beyond the
beneficiaries’ control.
Example of a project that generated the expected output and result
Poland
The audited project involving the extension and modernisation of a pumping station, with an estimated
cost of 700 000 euro, was completed in line with technical specifications, with approximately 100 000 euro
in savings compared to the budget approved (obtained through competitive tendering), and with a delay of
5 months due to the late delivery of an administrative document. The new, more powerful pumping station
was needed after the extensive flooding of almost 800 ha in the region in 2001 and improved the protection
of 320 ha of agricultural land against seasonal flooding.
Source: European Court of Auditors.
39
Observations
79
Box 14
However, this is not always the case.
It is possible for projects to fail to
achieve the intended results, despite delivering the agreed physical
outputs. The audit found that the
Member States did not collect reliable
information regarding the short- to
­medium‑term success of the projects
in terms of achieving RDP objectives
and the project‑specific targets. This
was mainly due to the failure to establish relevant indicators and an absence
of specific objectives and targets in
the application and grant decision. For
example, although the RDP for Italy
(Sicily) set the objective of achieving
water savings through investments
in water infrastructure, the author­
ities had not established an indicator
that would allow them to assess the
achievement of this objective; the
projects audited also lacked related
quantifiable targets.
80
At the date of the audit, three out of
the five Member States audited (Spain
(Extremadura), Italy (Sicily) and Poland)
had not submitted the mandatory
monitoring information required by
the CMEF regarding the measure 125
result indicator, ‘increase in gross value
added in supported holdings’. The
remaining two Member States (Germany (Saxony) and Romania) reported
a value for this indicator, which was
however based on unreliable information (see Box 14).
Unreliable data collection method: financial data from farms not taken into
account in measuring their competitiveness
Romania
The indicator ‘increase in gross value added in supported holdings’ aims to quantify the impact of measure
125 on the competitiveness of agricultural and forestry holdings supported. However, in Romania the indi­
cator was calculated at the level of the whole commune where the project was implemented (based on the
commune’s financial accounts) and not for the farms benefiting from the new roads.
81
As regards the result indicator for
measures 321, 322 and 323, ‘population in rural areas benefiting from
improved services’, Member States
reported the entire population of
the commune where the project was
implemented, irrespective of the
number of actual users of the financed
infrastructure (see Box 15). This reporting method leads to inflated figures,
especially since when several projects
are implemented in a single commune,
the entire population of the commune
is reported for each of these projects,
and is thus counted several times
when the figures are aggregated.
40
Box 15
Observations
Example of a project for which the total population of a commune was considered
as benefiting from a new investment, although the project concerned only
a limited number of inhabitants
Germany (Saxony)
For a project concerning the refurbishment of a 200-metre stretch of village road, the German authorities
reported under the result indicator for measure 322, ‘population in rural areas benefiting from improved
services’, that 40 631 people were benefiting from this investment. This is the total number of people living in
the commune; however, only a small proportion of them actually use the road, as about 300 people live in the
village where the project was implemented.
In its annual progress report for 2014, Saxony reported under the measure 322 result indicator that 2.9 million
people were benefiting from improved services in rural areas. This is more than the state’s total rural population of about 2 million people.
82
Even when the audited Member
States did set out additional, programme‑specific indicators, these
were incapable of measuring the success of the interventions. This was due
to two main issues. Firstly, Member
States did not set targets. Secondly,
the additional indicators measured
outputs such as the number of kilometres of road repaired, rather than
results related to the RDP objectives,
such as achieving water savings, allowing farmers to reduce transport costs
and providing certain services to the
rural population.
83
Twenty of the 32 audited projects
lacked measurable targets for results.
However, the auditors could obtain some data on the actual results
achieved (see examples in Box 16
and detailed information in Annex II).
Whilst certain positive results were
observed in 13 cases, in 10 of these the
information was not sufficient to allow
the auditors to conclude on the projects’ effectiveness in addressing RDP
objectives. In four cases, the relevant
indicators showed that targets had not
been achieved. In three further cases,
the information obtained was not reliable. More information on the audited
projects can be found in Annex II.
41
Box 16
Observations
Limited evidence of positive results and unreliable data
In Italy (Sicily) and Spain (Extremadura), the authorities did not collect data on individual project results.
Upon the auditors’ request, only three of the eight and respectively two of the seven audited beneficiaries in
these two regions could provide some quantified result data. The data generally showed a positive effect of
the investments. However, one project for relaying asphalt on a rural road in a tourist area of Spain (Extremadura) did not have a positive impact on the number of tourists. The average number of visitors had actually
decreased in the years following the project completion, compared to the average number of visitors before
the project. There was no information regarding the effects of the investment on the agricultural holdings.
Source: European Court of Auditors.
In Romania, the beneficiaries provided to the auditors quantified target and result data for four of the five
audited projects, which received grants ranging between 1 and 2.4 million euro.
Only one project had reached its target of connecting 575 users to the new water and sewerage system.
Three other projects were still far from achieving their targets almost 3 years after project completion: less
than half of the target number of users had been connected to the sewerage network for two water projects
and no new jobs had been created for the remaining project, although creating employment was one of its
objectives.
In Germany (Saxony), the data reported for the three main result indicators established for the measures
were based on the authorities’ assumptions on the likely result deriving from an investment. Targets and actual result data were not available for these indicators. The information that could be obtained by the auditors
for the audited projects was therefore limited to basic indicators such as the number of households served by
the financed roads.
In Poland, for four of the five audited projects, the beneficiaries reported to the managing authority data on
project results, which showed an increase in the number of users and a general achievement of project objectives. However, in three cases, no supporting evidence was provided to allow the Court to verify the reported
figures.
42
Observations
The Commission has
encouraged Member States
to improve monitoring
and evaluation, but some
weaknesses are likely to
persist in the 2014-2020
programming period
84
Although Member States are primarily
responsible37 for collecting the data
to feed output and result indicators,
the Commission is responsible for
monitoring and supervising the implementation of RDPs and publishes the
information collected from Member
States through the CMEF.
86
As regards the result indicator used
for measures 321, 322 and 323, ‘population in rural areas benefiting from
improved services’, the Commission
accepted the reported figures, despite
the risk of over‑estimating the number
of users. For the 2014-2020 period,
a similar result indicator will be used
for these measures (‘Percentage of
rural population benefiting from improved services/infrastructures’). The
Commission will not accept the same
population being reported several
times (for each project implemented in
the area) for the new result indicator;
however, such a reporting method is
explicitly allowed for the new output
indicator, ‘Population benefiting from
improved services/infrastructures’.
85
As regards the measure 125 result indicator ‘increase in gross value added
in holdings/enterprises supported’, the
Commission recognised that, despite
the guidance provided in 2010 on the
methodology to measure the GVA
increase, most of the Member States
faced difficulties in reliably assessing this indicator. Thus, it has been
replaced in the 2014-2020 programming period by the indicator ‘Change
in agricultural output on supported
farms/annual work unit’. The Commission indicated that the new indicator will only be assessed by external
evaluators, as Member States lack the
required expertise within their administrations. An additional compulsory
result indicator has been introduced in
the 2014-2020 programming period for
the equivalent measure 125, namely
‘percentage of irrigated land switching
to more efficient irrigation system’.
87
The Court could not assess at the time
of the audit to what extent the new
indicators will remedy the weaknesses
of the previous ones. However, assessing the effectiveness of the measures
only on the basis of the change in
agricultural output, percentage of land
switching to a more efficient irrigation
system and the population benefiting from the new infrastructure will
not provide a complete picture on the
success or otherwise of the funds allocated to the measures, given the great
diversity of projects financed.
37 Article 79 of Council
Regulation (EC) No 1698/2005.
43
Observations
88
In the 2007-2013 programming period,
due to the significant delays in the implementation of infrastructure measures, there was a mismatch between
the spending cycle and the timing of
the reporting requirements. This led to
a lack of pertinent data for mid‑term
evaluations and, most likely, even
the ex post evaluations will come too
early to be able to use reliable data. If
monitoring and evaluation information
is not available at key reporting moments, Member States and the Commission cannot use it to improve the
implementation of the measures.
89
This situation is likely to persist in the
2014-2020 programming period, as
Member States are required to prepare
the first ‘enhanced annual implementation report’ including evaluation
findings, in 2017, even though spending started quite late due to delays
in the RDP approval process38. The
absence of timely, reliable and pertinent information on the results of the
use of the public funds invested in
infrastructure makes the result‑based
management of future funds difficult
to achieve.
38 Only 79 of the 118 RDPs had
been approved by the
Commission by September
2015.
Conclusions and
recommendations
90
In 2007-2013 the EU provided 13 billion euro for rural infrastructure projects aimed at boosting the competitiveness of agricultural and forestry
holdings and improving the quality
of life in the countryside. Together
with Member States’ co‑financing, the
total support channelled through four
rural development measures reached
19 billion euro.
91
Infrastructure measures were implemented under shared management,
whereby the Commission approved
the RDPs submitted by Member States,
which then selected the projects to be
funded.
92
The Court’s audit sought to answer the
following question:
Have the Member States and the
Commission achieved value for
money with the support for rural
infrastructure investments?
93
Even though the individual audited
projects delivered their expected
physical outputs and, in some cases,
made a clear positive contribution to
the rural areas, the Court found that
the Member States and the Commission, acting through shared management, had achieved only limited value
for money, as aid was not systematically directed towards the most
cost‑effective projects addressing the
objectives set in the RDPs and there
was insufficient information to demonstrate the success or otherwise of the
measures.
94
The Commission and the Member
States share the responsibility for the
implementation of a huge number of
infrastructure projects, not only related to rural development but across
the spectrum of structural funds.
Despite this, there was little evidence
of effective coordination or sharing of
best practice in order to improve the
management of the funds and achieve
greater value for money through, for
example, project selection procedures,
checks on the reasonableness of costs
and sustainability‑related checks.
There remains scope for greater cooperation, which would allow for far
more to be achieved with the existing
level of funding.
95
The weaknesses identified and the
Court’s related recommendations are
further developed below.
44
Conclusions and recommendations
96
The audit found that the Member
States lacked a coordinated approach
for quantifying rural infrastructure
needs (e.g. the number of roads
needing repairs and the corresponding budget needed) and identifying
­sources of financing. None of the
audit­ed RDPs considered the existing national, regional, local public or
private funds that could address — or
were already addressing — the same
needs as the RDPs. Therefore, there
was no attempt to quantify the remaining funding gap — which would
justify the EAFRD intervention — for
such investments (see paragraphs
20 to 22).
99
The lack of clear demarcation lines led
in some cases to the alternate use of
different funds for the same types of
infrastructure, with the inherent risk of
needlessly duplicating management
structures (see paragraphs 31 to 32).
100
Whilst four of the five Member States
audited had set up coordination structures, they did not actively promote
complementarity between funds.
There were cases where the lack of
complementarity with national and
local funds jeopardised the efficiency
and effectiveness of the projects (see
paragraphs 33 to 36).
97
In the absence of a coordinated approach encompassing all financing
possibilities, substitution of funds may
occur, leading to an inefficient use of
scarce resources. In two of the audited
Member States, there were indications
that substitution had occurred, as the
national or regional funds available
for rural roads were cancelled or decreased precisely when similar projects
started to be supported under the RDP
(see paragraphs 23 to 24).
98
Although some good practices
were identified, Member States did
not systematically channel the RDP
funding to projects for which there
was a demonstrable need for public
support. As a consequence, there is
a risk of deadweight and the results
achieved by projects cannot necessarily be attributed to the grant (see
paragraphs 25 to 30).
101
The Commission took steps to improve
coordination between EU funds in
the 2014-2020 programming period,
but the Member States’ programming
docu­ments do not yet provide suffi­
cient assurance that the new approaches will lead to better coordination (see paragraphs 37 to 41).
45
Conclusions and recommendations
Recommendation 1 —
Analysis of needs and
coordination between
funding sources
(a) The Member States should have
a coordinated approach for supporting rural infrastructure, which
quantifies needs and funding gaps
and justifies the use of the RDP
measures. This approach should
consider the EU, national, regional
and local public funds and the private funds that could address — or
are already addressing — the same
needs as the RDP. Member States
should ensure that RDP funds do
not merely replace other public
funds dedicated to the same policy
area and select projects for which
there is a demonstrable need for
public support and which deliver
added value.
(b) In fulfilling its role in shared
management, the Commission
should promote the adoption of
best practices in mitigating the
risk of deadweight and encourage
Member States to avoid simple
substitution of other funds by the
RDP resources, thereby achieving
greater added value for the EU
funds employed.
(c) Member States should make better
use of the existing coordination
structures such as coordination
bodies and joint management,
control and monitoring arrangements to implement effective
mechanisms aimed at minimising
gaps and overlaps in funding, in
line with the guiding principles of
the common strategic framework.
For example, Member States could
prioritise projects that best fit with
national, regional or local plans
for the integrated development of
infrastructure.
(d) The Commission should build
upon the first steps taken to
ensure effective coordination between the different EU funds and
carry out a thorough assessment
of the complementarity between
the different EU funds to be used
by Member States in the 20142020 programming period. The
Commission should be proactive
in encouraging Member States to
draw on the experience gained
with other funds supporting infrastructure (such as the ERDF and
the Cohesion Fund) to improve
the efficiency of the management
of the measures. It should take
the opportunity provided by the
enhanced annual implementation
report to be submitted by Member States in 2019 to assess the
effectiveness of the coordination
mechanisms and suggest improvements where necessary.
46
Conclusions and recommendations
102
EU legislation requires Member
States to establish selection criteria;
these should allow the most effective and efficient eligible projects to
be prioritised, and provide a basis
for rejecting those that do not represent value for money. In the Member
States audited, selection criteria were
either not set out or they did not
always lead to actual prioritisation
of the most cost‑­effective projects
in relation to the RDP objectives (see
paragraphs 43 to 49).
104
To ensure the sustainability of investments, the audited Member States
generally applied the standard 5-year
commitment period requirement —
which in practice was reduced to
much less for most of the projects. For
certain projects, three of the audited
Member States applied longer commitment periods, which were more in line
with the useful life of the investments.
However, none of the audited Member
States asked beneficiaries to provide
a detailed maintenance plan and to set
aside some budget for maintenance
(see paragraphs 55 to 60).
103
The Court identified weaknesses in the
systems put in place by the Member
States to assess the reasonableness
of project costs. These weaknesses
increase the risk of public funds not
being spent in the most econom­
ical way. The Member States audited
mainly relied on the use of reference
prices and public procurement proced­
ures to ensure the reasonableness of
costs. However, these tools were not
adequately applied to ensure reason­
ableness of costs, as the Court has
noted in its previous reports. Although
widely used, the systems based on
reference price lists showed serious
limitations, as reference prices were
often set above the real market prices
at which transactions happen (for
example when competitive tenders
are organised). In several cases, public
procurement processes hindered fair
competition and reasonableness of
costs (see paragraphs 50 to 54).
105
To make EAFRD funding attractive to
potential beneficiaries and to allow
projects to generate timely benefits
for rural areas, administrative proced­
ures should not be excessively long
and burdensome. Two of the audited
Member States/regions did not set
deadlines for processing grant and
payment applications, whereas the
other three largely exceeded the deadlines they had set, especially for grant
applications (see paragraphs 61 to 65).
106
In the first part of the 2007-2013 programming period, the Commission did
not sufficiently encourage Member
States to follow the value‑for‑money
principles (economy, efficiency and
effectiveness), for example by setting
selection criteria prioritising the most
cost‑effective projects, applying sound
reference prices and ensuring fair
and competitive public procurement
procedures. The Commission has, however, proposed some improvements
for the 2014-2020 programming period
(see paragraphs 66 to 72).
47
Conclusions and recommendations
Recommendation 2 —
Management of the
measures
(a) Member States should establish
and consistently apply criteria to
ensure the selection of the most
cost‑effective projects — the
projects with the potential to make
the greatest contribution to the
RDP objectives per unit of cost
(such as projects delivering the
highest increase in farms’ productivity or the highest water savings
per unit of cost in areas most seriously affected by water shortages).
These selection systems should
systematically set a minimum
threshold taking into account the
quality of the projects.
(b) With regard to effective checks
on the reasonableness of costs,
the Commission and the Member States should implement the
recommendations in the Court’s
special report on this subject39. In
particular for infrastructure projects, the Member States should
ensure that project cost estimations are based on up‑to‑date
price information that reflects
actual market prices and that public procurement procedures are
fair and transparent and promote
genuine competition.
(c) Member States should take into
account the useful life of the supported investments when establishing the sustainability‑related
requirements and checks.
(d) Member States should set a reas­
onable timeframe for processing
grant and payment applications
and respect it.
107
The 32 audited projects generally delivered the expected physical outputs,
such as new or rehabilitated roads,
water supply and sewage systems, or
improved school facilities. However,
the Court found, as in previous reports 40, that information on project
results was either missing or insufficiently reliable to draw a conclusion on
the effectiveness of these measures.
Meaningful data about results is either
not collected or, when collected, is
based on beneficiaries’ declarations or
estimates which are not directly linked
with the financed projects.
108
Twenty of the 32 audited projects
lacked measurable objectives and
targets. Where measurable objectives could be identified, there was
little or no assurance concerning the
reliability of the reported data and
limited evidence of positive results for
the few projects for which result data
was available. For example, several
projects aiming to improve the quality
of life of rural populations reported
the total number of people living in
a commune as the ‘population in rural
areas benefiting from improved services’; however, the new facilities built,
such as roads in remote areas, had
only a limited number of users (see
paragraphs 77 to 83).
48
39 See Special Report
No 22/2014.
40 See Special Reports
Nos 8/2012, 1/2013, 6/2013 and
12/2013.
Conclusions and recommendations
109
The Commission has proposed
changes for the 2014-2020 programming period. However, weaknesses
in the quality of the indicators and
the late start of the implementation
of the measures are likely to affect
the monitoring and evaluation process (see paragraphs 84 to 89). In
the absence of timely, relevant and
reliable information on results, decisions on future policy direction and
how to best achieve the objectives set
for infrastructure investments in rural
areas are hampered and the Commission’s ambition to manage the budget
by results ensuring that every euro is
spent wisely becomes more difficult to
attain.
Recommendation 3 —
Monitoring, evaluation and
feedback
(a) For the 2014-2020 programming
period, the Commission and the
Member States should collect
timely, relevant and reliable data
that provides useful information
on the achievements of the projects and measures financed. This
information should allow conclusions to be drawn on the efficiency
and effectiveness of the funds
spent, identify the measures and
types of infrastructure projects delivering the greatest contribution
to the EU objectives and provide
a sound basis for improving the
management of the measures.
(b) Member States should ensure that
clear, specific objectives are set
for the projects to which funds are
committed. Objectives should be
quantified where possible to facilitate the execution and monitoring of the projects and to provide
useful feedback for the managing
authorities.
This Report was adopted by Chamber I, headed by Mr Augustyn KUBIK, Member
of the Court of Auditors, in Luxembourg at its meeting of 16 December 2015.
For the Court of Auditors
Vítor Manuel da SILVA CALDEIRA
President
49
50
Annex I
Annexes
EU funds for infrastructure measures 125, 321, 322 and 323 — programmed and
spent in the 2007-2013 programming period
million euro
3 000
2 500
2 000
1 500
1 000
500
0
DE PL RO ES IT BG EL FR PT CZ HU SK AT UK NL LT LV SE FI EE SI DK MT CY IE BE LU
Programmed expenditure 2007-2013
Realised expenditure (as at March 2014)
Source: European Court of Auditors’ compilation on the basis of data provided on the website of the European Network for Rural Development: financial and physical indicators (http://enrd.ec.europa.eu/enrd-static/policy-in-action/rural-development-policy-in-figures/
rdp-monitoring-indicator-tables/financial-and-physical-indicators/en/financial-and-physical-indicators_en.html).
51
Overview of projects audited
Member
Measure
State
Germany (Saxony)
Annex II
Annexes
Project
description
125
Repairing
1.4 km of
forest road
321
Escape
stairway and
extension of
primary school
321
Eligible RDP aid
costs
as % of
(rounded, eligible
euro)
costs
Delays
(months)
Funding
date
Works end
date
Measurable targets for
project results?
Project results at
the date of the
audit visit (Oct.
2014-Feb. 2015)
1 000 m3 of timber
harvest in 5 years
3 936 m3 of timber
harvest in 4 years
No
75 students and
6 teachers benefiting
from improved safety
100 000
80 %
—
15.5.2009
10.10.2009
35 000
100 %
—
8.5.2012
5.9.2012
Extension
of day‑care
centre
145 000
100 %
6
30.9.2011
24.10.2012
To reduce energy
consumption
Energy‑saving
measures
implemented
321
Repairing
1.6 km of road
130 000
85 %
—
11.3.2011
22.7.2011
Direct beneficiaries:
12 households,
3 firms, 2 holdings
Direct beneficiaries:
12 households,
3 firms, 2 holdings
321
Repairing
1 km of road
110 000
85 %
—
4.4.2011
2.9.2011
No
Not quantified
322
Repairing
0.175 km
of road and
0.252 km of
pedestrian slip
115 000
89 %
—
26.3.2009
17.11.2009
Direct beneficiaries:
12 households,
3 public buildings
Direct beneficiaries:
12 households,
3 public buildings
322
Repairing
1.6 km of road
17.8.2010
Direct beneficiaries:
170 households,
15.8.2011 6 firms
and 2 public
buildings
Direct beneficiaries:
170 households,
6 firms and 2 public
buildings
760 000
85 %
—
52
Member
Measure
State
Italy (Sicily)
Annex II
Annexes
Project
description
Eligible RDP aid
costs
as % of
(rounded, eligible
euro)
costs
Delays
(months)
Funding
date
Works end
date
Measurable targets for
project results?
Project results at
the date of the
audit visit (Oct.
2014-Feb. 2015)
125
Building
2.7 km of road
and repairing
2.6 km of road
1 330 000
80 %
4
25.2.2010
16.1.2013
No
Not quantified
125
Building
3.3 km of road
1 060 000
80 %
6
30.12.2010
21.3.2013
No
Not quantified
125
Building
3.3 km of road
and repairing
2.2 km of road
1 350 000
80 %
4
31.8.2010
23.8.2012
No
Increase in number
of animals: + 26 % in
2010-2014
125
Building
2.8 km of road
and repairing
1 km of road
960 000
80 %
2
21.12.2010
19.10.2012
No
Increase in number
of tourists: + 28 %;
Increase in number
of animals: + 38 % in
2011-2013
125
Replacing
4 km of pipes
serving 390
farmers
1 760 000
100 %
—
10.11.2011
8.1.2014
No
Not quantified
321
Renewal of
aqueduct
network and
water tank
130 000
100 %
—
30.3.2012
13.1.2014
No
Reduction of 10-15%
in water losses
322
Renewal of
village water
fountain
160 000
100 %
—
3.7.2012
19.6.2013
No
Not quantified
322
Renewal of
village main
square (build‑
ings + water
fountain)
810 000
100 %
3
22.11.2011
15.2.2014
No
Not quantified
53
Member
Measure
State
Poland
Annex II
Annexes
Project
description
Eligible RDP aid
costs
as % of
(rounded, eligible
euro)
costs
Works end
date
Measurable targets for
project results?
Project results at
the date of the
audit visit (Oct.
2014-Feb. 2015)
17.11.2010
25.6.2012
To improve flood
protection for an
area of 320 ha
Better flood protec‑
tion for 320 ha
16.12.2009
172 new users
reported, however no
supporting evidence
provided; drop in
To meet legal water
28.8.2012 quality standards
utilisation rate from
81 % in 2012 to 71 %
in 2014; legal water
quality standards
met
11.8.2011
No
160 users (water
supply) and 150
users (sewerage)
reported, however no
supporting evidence
provided
Delays
(months)
Funding
date
5
125
Improving
pumping sta‑
tion to protect
from flood
321
Reconstruc‑
tion and
extension
of a sewage
treatment
plant
321
Building
4.5 km of
water supply
and 2.8 km of
sewerage
network
321
Building
8.9 km of sew‑
erage network
and repairing
1.7 km of
water supply
network
800 000
50 %
2
16.12.2009
31.12.2012
No
48 new users
reported, however no
supporting evidence
provided
Renovat‑
ing cultural
centre, park‑
322/323
ing area and
equipment for
football pitch
95 000
75 %
—
14.8.2009
31.12.2011
No
Not quantified
800 000
2 500 000
300 000
75 %
40 %
75 %
—
—
9.8.2012
54
Member
Measure
State
Project
description
Eligible RDP aid
costs
as % of
(rounded, eligible
euro)
costs
Delays
(months)
Funding
date
Measurable targets for
project results?
Project results at
the date of the
audit visit (Oct.
2014-Feb. 2015)
22.10.2012
No
Direct results not
quantified; number
of subsidised farms
in the area increased
from 58 in 2012 to
72 in 2014
No new jobs, 16
children attending
after‑school facility
Works end
date
125
Repairing
7.4 km of road
322
Repairing
18.5 km of
road and
building afterschool facility
for 10 children
2 400 000
100 %
8
17.6.2010
13.12.2012
7 new jobs; 10
children to attend
the after‑school
facility
322
Building
15 km of
water supply
network and
14.5 km of
sewerage
system and
wastewater
treatment
plants
2 190 000
100 %
10
28.8.2008
23.6.2011
575 new sewerage
connections
628 new sewerage
connections; water
quality improved
322
Building
0.93 km of
road and
21 km of
sewerage
system
1 270 000
100 %
—
25.9.2008
16.5.2011
1 725 new
sewerage
connections
802 new sewerage
connections
322
Repairing
4 km of road,
building 14 km
of sewerage
system, reno‑
vating town
hall and daycare centre for
12 children
22.7.2009
871 new sewerage
connections,
8 new
28.5.2012 jobs, 12 children
in
the day-care centre
Romania
Annex II
Annexes
800 000
1 770 000
100 %
100 %
2
16
1.12.2010
327 new sewerage
connections, no new
jobs, 12 children in
the day-care centre
55
Member
Measure
State
Spain (Extremadura)
Annex II
Annexes
Project
description
Eligible RDP aid
costs
as % of
(rounded, eligible
euro)
costs
Delays
(months)
Funding
date
Works end
date
Measurable targets for
project results?
Project results at
the date of the
audit visit (Oct.
2014-Feb. 2015)
125
Repairing
1.3 km of
water irriga‑
tion canal and
replacing
7 pumps/
filters
800 000
90 %
—
29.8.2013
29.8.2014
No
Not quantified
125
Building
144.6 km of
non‑paved
roads serving
1629 farmers
7 910 000
100 %
—
23.2.2009
21.1.2011
No
Not quantified
1 420 000
100 %
—
25.9.2012
22.1.2013
No
22 % decrease in the
number of tourists
in the 2 years after
works (2013-2014),
compared to average
number of tourists in
the 2007-2012 period
Repairing 18.2
km of road
630 000
100 %
—
11.2.2013
2.2.2014
No
Not quantified
323
Signalling
rural paths
120 000
100 %
—
2.7.2013
30.5.2014
No
Not quantified
323
Renewing
a rural/bicycle
path
120 000
100 %
—
29.5.2013
8.5.2014
No
Not quantified
413
Buying
furniture and
equipment in
residence for
elderly
175 000
100 %
—
1.8.2011
125
Repairing
two roads
of 6.4 km +
14.8 km
125
persons to
23.3.2012 30 more
be hosted
30 more persons
could be hosted
56
Reply of the
Commission
Executive summary
III
The Member States were encouraged to include in
their rural development programmes (RDPs) the
most important rural areas to be developed. The
RDPs had to identify the areas where the use of EU
support for rural development adds the most value.
The Member States had to choose the most relevant
operations to be funded. The EAFRD has permitted
the funding of investments which otherwise may
have not been funded.
III First indent
In the 2007-2013 programming period, the Member
States were requested to justify their investment
priorities based on a SWOT analysis of needs. Provisions concerning strategic programming and an
effective coordination in the use of different funds
have been strengthened in the 2014-2020 programming period. The risk of deadweight has to be
considered on a case by case basis, depending on
the type of investments concerned and local investment conditions.
III Second indent
Selection criteria and selection procedures are
defined by the Member States. During the 20072013 programming period, the Commission
reminded on several occasions the Member States
of the obligation to set up genuine selection criteria
and to correctly apply the selection procedures.
In order to help the Member States to avoid weaknesses in the application of selection criteria the
Commission produced guidance on eligibility and
selection applicable to the 2014-2020 programming
period.
III Third indent
Information available through the monitoring and
evaluation system (e.g. mid-term evaluations), while
incomplete and possibly not always fully reliable,
did provide a good overview of the implementation of RDPs. However, for multiannual programmes
certain results, such as gross value added, and
impacts can only be properly assessed well into the
programming period and afterwards. Such effects
can only be measured after sufficient time since the
implementation has passed. For most interventions,
this was not yet the case at the moment of the
mid-term evaluation. Consequently, certain results
and impacts of the programmes could not yet be
measured, unlike the expenditure or outputs.
IV
The Commission issued basic guidance for the
2007-2013 programming period to help the Member
States to prepare their RDPs.
As regards the 2014-2020 programming period, the
Commission has issued more extensive guidance
providing information on eligibility conditions,
selection criteria and investments.
V (a)
This recommendation is for the Member States.
V (b)
The Commission accepts this recommendation and
has started to implement it.
57
Reply of the Commission
When establishing the legal framework for the
2014-2020 programming period, the Commission
has taken the necessary steps to improve coordination between different funds as regards the support
to rural infrastructures. Coordination and complementarity of EU funds at the level of national/
regional strategies is addressed by the different services of the Commission. It is however for national/
regional authorities to enforce such coordination/
complementarity at measure/project levels when
implementing the programmes.
The Commission will regularly monitor and assess
implementation in the Member States within the
established framework for performance monitoring
and reporting.
Observations
Common Commission reply to
paragraphs 20-22
In the 2007-2013 programming period, the Member
States were requested to justify their investment
priorities based on a SWOT analysis of needs. Provisions concerning strategic programming and an
effective coordination in the use of different funds
have been strengthened in the 2014-2020 programming period.
This recommendation is for the Member States.
Coordination was to be ensured at national and/or
regional level. The Member States and/or regions
have been considering together the need for complementarities on the basis of demarcation. Often
integrated approaches at regional and local level
have been followed aiming at optimising the EU
co-funding.
V (d)
23
V (c)
The Commission accepts this recommendation.
However, given the limited value of assessing measures in isolation, the Commission is of the opinion
that evaluation should be carried out at the level
of the focus areas, which reflect policy objectives.
Moreover, the Commission stresses the importance
of evaluation to interpret and analyse the data collected in order to draw conclusions on effectiveness
or efficiency.
V (e)
This recommendation is for the Member States.
Based on lessons learnt during the 2007-2013 programming period, the legal framework for the 20142020 programming period reinforces a strategic
approach to programming and enhances complementarity among EU and national funds.
24
The interventions under the RDPs are co-financed
by the Commission and the Member States. In the
context of scarcity of national financial resources,
the EAFRD has allowed the Member States and
regions to fund interventions in rural areas, which
otherwise may have not been financed, to the
bene­f it of local populations.
Box 2 — Italy (Sicily)
According to the Sicilian authorities, the region
experienced a lack of national or regional resources
to fund structural investments. In this context, the
EAFRD has allowed the region to fund interventions
in rural areas, which otherwise may have not been
financed.
58
Reply of the Commission
Box 2 — Germany (Saxony)
The substitution of public funds illustrated by the
case of Saxony is a consequence of the annuality
of budget spending in Germany, while the RDP is
a multiannual programme (7 years) for the implementation of which the rule ‘n+ 2’ applies.
25
The substitution of public funds by the EAFRD at
project level does not necessarily entail the absence
of additional effects on the outcome. It is not demonstrated, based on the audited projects, that the
EAFRD measures have not supported investments
for which the financial returns were insufficient to
justify the full costs of the investment.
26
Backing aid rates with economic analysis is not foreseen in the legislation. However, several Member
States justified the need for RDP intervention and
conducted macroeconomic analyses. For example:
— the Sicily RDP does include an analysis of agriculture, forestry and rural areas and provide for
an identification of relevant needs;
— the Romania RDP includes a description of the
need for infrastructure investments including
some quantification of needs. The co-financing
rates were set up at axis level taking into account macroeconomic criteria.
See also common Commission reply to paragraphs
20-22.
29
Projects can be funded through EAFRD support
and/or national resources. This does not mean that
projects would have been implemented even in the
absence of the RDP funds. The Commission is of the
opinion that appropriate selection criteria represent
an essential means to ensure an effective targeting
of support. The checking of the financial capacity
of individual applicants should not lead to a disproportionate administrative burden for the managing
authorities.
Box 4
In the case of Sicily, the Italian authorities have identified
double funding and consequently the projects concerned have been excluded from the aid granted under
the RDP.
31
The setting up of demarcation criteria is one possible
way to avoid double funding. However, the overlapping
of public funds can occur as long as double funding of
the same items is avoided as it does not necessarily entail
a lack of added value from the different interventions.
31 First bullet
According to Article 56 of Regulation (EC) No 1698/2005,
the EAFRD finances only ‘small infrastructure’ in the measure ‘basic services’. For this reason the RDP for Saxony
set up a celling for these types of projects. This does not
prevent the ERDF from supporting integrated projects.
31 Second bullet
The demarcation criteria set by Sicily in the RDP are clear
and do not allow the overlapping of public funds. The
managing authority is responsible for the implementation of appropriate controls to ensure the respect of the
demarcation.
31 Third bullet
The Polish RDP for 2007-2013 contains demarcation rules
regarding:
(a) type of the project: for example broadband skeleton
infrastructure for the ERDF; ‘last-mile’ for the EAFRD;
(b) localisation: for example broadband in ‘white’ rural
­areas (i.e. with no access to broadband).
This means that a single project can only be funded from
a single source at any given point in time.
59
Reply of the Commission
32
Article 60 of Regulation (EC) No 1698/2005 refers to
the obligation of establishing demarcation criteria
only in relation to EU support instruments. The
management of national funds and the setting up
of national/regional coordination structures are the
responsibility of the Member States. The overlapping between the EU and national funds in a given
area does not jeopardise complementarity as long
as double funding of the same operation is avoided.
38
In 2007-2013, programmes could only be approved
in the presence of needs analyses backing satisfactorily the Member States’ strategic choices. Only
overlaps between funds for the same type of operations can be accepted, provided this does not lead
to double funding of the same undertakings.
In 2007-2013, complementarity between Community support instruments was sought by the establishment of demarcation criteria.
33
See also Commission common reply to paragraphs
20-22.
— Romania set up a mechanism aimed at promoting complementarity;
40
Several Member States took actions to ensure complementarity between the funds. For example:
— Italy has set up a framework within which all
EU-supported regional programmes can operate in synergy to achieve common objectives.
Substitution does not necessarily entail the absence
of added value from the different funds. Substitution was necessary in some cases due to a difficult
situation in the public finances of many Member
States and regions.
35
41
Coordination was to be ensured at national and/or
regional level. The Member States and/or regions
have been considering together the need for complementarities on the basis of demarcation. Often
integrated approaches at regional and local level
have been followed aiming at optimising the EU
co-funding.
36
As regards Romania, this single example does not
mean that there is no complementarity between
the funds.
As regards Sicily, the region has been requested
by the Commission to clarify in the draft 20142020 RDP that no support can be granted for
the restructuring of roads which have fallen into
disrepair because of a lack of regular maintenance
or for new roads in areas already served by roads
which have fallen into dis­repair because of a lack of
maintenance.
Complementarity in the intervention by different
funds is considered in the partnership agreements
and at the level of operational and rural development programmes.
The Romanian partnership agreement contains
information on synergies between different funds
and details of coordination mechanisms. Moreover,
at the level of individual measure fiches, Romania
has indicated possible complementarity and coordination with other funds.
The issue of complementarity was extensively discussed with the Member States during the negotiations regarding the 2014-2020 RDPs. The Commission has provided appropriate guidance to the
Member States on these issues.
60
Reply of the Commission
The draft 2014-2020 RDP for Sicily, the approval of
which was ongoing at the time of the audit, does
provide a description of the mechanisms to promote the complementarity between the different
EU funds.
Box 7 — Italy (Sicily)
The applicable eligibility conditions and selection
criteria are only those defined in the Sicily RDP, as
approved by the Commission. The call for proposals
should not set eligibility conditions in addition to or
alternative to those defined in the RDP. Nor should
the region implement RDP measures according
to criteria which are not foreseen by the relevant
measure fiche as described in the RDP. It is the
responsibility of the managing authority to ensure
the correct implementation of the programme.
45
The weaknesses identified are expected to be
addressed in the 2014-2020 RDPs. Article 49 of
Regulation (EU) No 1305/2013 requires that selection criteria are applied according to a transparent
and well-evidenced procedure. In addition, the
Commission's guidance on eligibility and selection
criteria for the 2014-2020 RDPs specifically mentions
that selection criteria should be applied even when
the managing authority is the sole beneficiary.
47
In Poland, the beneficiaries of this measure were
regional bodies responsible for water infrastructure, which are, inter alia, responsible for the proper
selection of projects.
48
It is the responsibility of the Member States and
regions to make sure that selection criteria are correctly applied to ensure that only the best-quality
projects are supported by EAFRD. The Commission
has provided guidance to the Member States as
regards the application of appropriate selection
criteria.
Box 9 — Italy (Sicily)
At the monitoring committee meeting in June 2013,
the managing authority informed the Commission
about the correct application of all selection criteria
foreseen by the RDP. Moreover, all new calls for
proposals after June 2013 for measures under axes
1 and 3 included a minimum threshold of points to
further ensure the quality of the selected projects.
50
The Commission has issued guidance on reason­
ableness of costs which addresses the need to make
risk-based checks according to amounts and aid
intensities at stake.
51
In its guidance on rural development controls and
penalties, the Commission encourages Member
States to have reliable price databases in place and
if possible to complement this system with a comparison of offers and expert opinions.
Box 11 — Spain (Extremadura)
During the approval process for the 2014-2020 RDP
for Extremadura, the Commission addressed the
issue of direct awarding of the aids to state-owned
companies, in particular with regard to the justification of prices. This weakness is expected to be
addressed in the 2014-2020 RDP.
61
Reply of the Commission
56
While requiring the submission of a maintenance
plan may be considered as a good practice for
certain investments, there is no legal obligation to
do so.
57
The Commission has also identified this risk, and
following the Court’s specific findings on this issue,
it has been included in the Romanian error rate
action plan.
58
The 2014-2020 RDP for Sicily had not been approved
at the time of the audit. Following negotiations with
the regional authorities, it has been decided that
the costs of these projects will not be supported
under the 2014-2020 RDP.
60
According to Article 71 of Regulation (EU) No
1303/2013, in the 2014-2020 programming period
the 5-year period cannot start at the time of
approval of the application but will start with the
last payment to the beneficiary.
61
During the 2014-2020 programming period negotiations the Commission encouraged the Member
States to speed up the administrative processes so
that beneficiaries can implement the operations
from the beginning of the programming period.
62
While setting administrative deadlines may be
considered as a good practice, there are no legal
provisions that empower the Commission to force
Member States to set such deadlines.
63
The Member States have been reminded of the
importance of a timely implementation of the
measures to ensure a successful execution of the
programmes and an efficient use of EU funds during the annual review meetings and the meetings
of the monitoring committees.
67
The Commission's audits found similar weaknesses to those identified by the Court, such as
non-­conformities with regard to the selection of
projects, the reasonableness of the costs or noncompliances with public procurement provisions.
Based on the findings of these audits, the audited
Member States undertook to take corrective measures in order to improve the performance of the
abovementioned areas.
70
The only outstanding modification of the (national)
public procurement law in Poland entered into
force on 19 October 2014. Assessment by the Commission is ongoing.
Romania did develop during 2015, in conjunction with the Commission services, a reinforced
action plan for this ex ante conditionality. This was
adopted by the Romanian authorities on 9 July
2015 and is now being implemented for all ESIF
programmes.
71
The assessment of reasonableness of costs has been
largely covered in the guidance on controls and
penalties for rural development, which also includes
information on the use of reference prices.
62
Reply of the Commission
72
Infrastructure projects must ensure that during
the 5 years following the final payment, there is no
substantial change of the projects affecting their
nature, objectives or implementation conditions
which would result in undermining of their original
objectives. This is to be verified with ex post checks
on a sample basis as provided by Article 52 of Regulation (EU) No 809/2014.
Common Commission reply to
paragraphs 79 and 81
In the 2007-2013 programming period, the CMEF
was a new feature. Some Member States required
a learning curve regarding the methodology of data
collection, processing and the use of the evaluation
results.
Information available through the monitoring and
evaluation system, while incomplete and possibly
not always fully reliable, was the best available at
this stage, taking into account financial and practical limitations. The Commission has proposed solutions for a number of problems related to the monitoring and evaluation system for the programming
period 2014-2020 but there will always be the need
to find a balance between the benefits of monitoring and evaluation and the costs and administrative
burden related to it.
80
In its observation letters addressed to the Member
States concerning the annual progress reports, the
Commission has invited the authorities to speed up
the process of quantification of the indicators.
Box 15
The fact that only a few hundred of persons live
in a village in which a road is built does not give
information on how many actually use it or might
use it. Not only the rural population benefits from
improved services in rural areas.
The double counting of the rural population for the
aims of measure 322 (village renewal) was intended
and is a result of the adopted methodology.
83
There is no legal requirement for setting quan­tified
targets for each individual projects. The CMEF foresees target setting at RDP level by the managing
authority.
As shown in Annex II to the report, four out of
five Polish projects had quantifiable results, while
the only exception related to the cultural/sport
infrastructure.
85
For 2014-2020 CMES, the new result indicator
'Change in agricultural output on supported farms/
annual work unit’ will be assessed by external evaluators in 2017 and 2019 and in the ex post evaluations. The Commission considers that this frequency
is appropriate taking into account the cost/benefit
ratio of such evaluations.
86
The two 2014-2020 CMES indicators (the output
and result indicators 'population benefiting from
improved services/infrastructure') will complement
each other. They will measure respectively the gross
and the net number of population benefiting for
the operations.
87
The assessment of the effects of measures will be
carried out against the programmes' objectives to
which they contribute. The objectives are defined at
the level of focus areas for which targets are established ex ante. The progress of the programmes
against these targets is regularly monitored. This
approach reflects a result orientation of the policy
and enables the combined effects of measures
against relevant objectives to be better assessed.
63
Reply of the Commission
The Member States can define additional programmespecific indicators in relation to a set of key measures.
However, this should not be requested systematically for
all measures for reasons of keeping the costs of monitoring and evaluation reasonable. Ex post evaluators will
further investigate the performance of single measures/
sub-measures.
Moreover, the indicators as defined in the legislation or
by the Member States are only the starting point for an
evaluation, The evaluators can collect additional information, for example through case studies.
88
The mid-term evaluation did provide a good overview of
the implementation of RDPs. However, for multi­annual
programmes such as RDPs certain results (e.g. gross
value added) and impacts can only be properly assessed
and measured after sufficient time since implementation
has passed.
89
The 2014-2020 monitoring and evaluation system incorporates a number of improvements in comparison with
the 2007-2013 CMEF:
— Enhanced annual implementation reports (AIRs)
incorporating evaluation findings will replace midterm evaluations. The first AIR in 2017 will concentrate on elements related to programme steering,
while the second AIR in 2019 will provide an initial
assessment of the impact of the RDPs.
— The Member States will be required to carry out
evaluation activities throughout the programming
period in accordance with the evaluation plan
included in the RDPs.
— The assessment and reporting of the results and impacts of the policy will be linked more appropriately
to the stage of implementation of the RDPs.
Conclusions and
recommendations
93
The Member States were encouraged to include
in their RDPs the most important rural areas to be
developed. The RDPs had to identify the areas where
the use of EU support for rural development adds
the most value. The Member States had to choose
the most relevant operations to be funded. The
EAFRD has permitted the funding of investments
which otherwise might not have been funded.
94
Sharing best practices can best be done ex post,
since infrastructure investments are of a longer-term
nature and their benefits will be shown at a later
stage. However, lessons learnt from the previous
programming period are reflected in the legislative
framework for 2014-2020. The European Network for
Rural Development promotes the sharing of good
practices among Member States and regions.
96
Coordination was to be ensured at national and/or
regional level. The Member States and/or regions
have been considering together the need for complementarities on the basis of demarcation. Often
integrated approaches at regional and local level
have been followed, aiming at optimising the EU
co-funding.
97
The interventions under the RDPs are co-financed by
the Commission and the Member States. In the context of scarcity of national financial resources, the
EAFRD has allowed the Member States and regions
to fund interventions in rural areas, which otherwise
may have not been financed, to the benefit of local
populations.
64
Reply of the Commission
98
In the 2007-2013 programming period, the Member
States were requested to justify their investment
priorities based on a SWOT analysis of needs. Provisions concerning strategic programming and an
effective coordination of the use of different funds
have been strengthened in the 2014-2020 programming period. The risk of deadweight has to be
considered on a case-by-case basis, depending on
the type of investments concerned and local investment conditions.
Common Commission reply to
paragraphs 99 and 100
The demarcation and complementarities were
detailed in the 2007-2013 programming documents.
While the support by different funds to the same
type of interventions does not necessarily compromise the added value of the contributions, double
funding of the same investment was excluded
through the establishment of demarcation lines.
Synergies have been encouraged by allowing joint
interventions by different funds in certain areas,
while demarcation was ensured through the use
of criteria such as financial ceilings or physical
parameters.
For the 2014-2020 programming period, the issue
of complementarity and demarcation was raised in
the RDPs. Also, the so-called ‘Commission services’
position papers’ drawn up for each Member State
provided guidance on the coordinated interventions of the ESIF. The Member States have to ensure
the complementarity, consistency and conformity
with other EU instruments.
Recommendation 1 (a)
This recommendation is for the Member States.
Recommendation 1 (b)
The Commission accepts the recommendation and
has started to implement it.
The risk of deadweight has to be considered on
a case-by-case basis, depending on the type of
investments concerned and local investment con­
ditions. Exchange of best practices concerning the
mitigation of the risk of deadweight will be promoted through the activities of the European Rural
Development Network.
Mechanisms to ensure better complementarities and coordination between funds have been
reinforced in the 2014-2020 programming period
through the partnership agreements, where the
Member States have to describe the use of ESIF in
order to ensure complementarity and synergies of
activities. The issue of complementarity and demarcation was also raised in the RDPs.
While the principle of additionality of RDP resources
to national funds is addressed at programme level
by applying the relevant co-financing rates, the
Commission will continue to promote efficiency in
rural development spending.
65
Reply of the Commission
Recommendation 1 (c)
This recommendation is for the Member States.
Recommendation 1 (d)
The Commission accepts this recommendation and
has started to implement it.
When establishing the legal framework for the
2014-2020 programming period, the Commission
has taken the necessary steps to improve coordination between different funds as regards the support
to rural infrastructures.
Coordination and complementarity of EU funds at
the level of national/regional strategies is addressed
by the different services of the Commission. It is
however for national/regional authorities to enforce
such coordination/complementarity at measure/
project levels when implementing the programmes.
The Commission will regularly monitor and assess
implementation in the Member States within
the established framework for monitoring and
reporting.
103
The Commission's audits have also identified weaknesses in the systems put in place in the Member States to assess the reasonableness of costs.
In some cases, financial corrections have been
imposed.
The improvement of checks on the reasonableness
of costs and public procurement is a priority for the
Commission. Training related to these issues has
been delivered for the managing authorities and
paying agencies and specific guidance has been
issued. As regards public procurement, an action
plan for all ESI funds and specific guidance for practitioners, training courses and dedicated webpages
are being developed.
Public procurement is an ex ante conditionality for
all ESI funds and where there is not enough assurance that procedures and institutions in place can
manage EU funds in an effective and efficient way,
respecting the legality of the transactions, payments to the Member States might be suspended.
104
While requiring the submission of a maintenance
plan may be considered as a good practice for
certain investments, there is no legal obligation to
do so.
105
While setting administrative deadlines may be
considered as a good practice, there are no legal
provisions that empower the Commission to force
Member States to set such deadlines.
Recommendation 2 (a)
This recommendation is for the Member States.
Recommendation 2 (b)
The Commission accepts this recommendation.
The Commission is implementing the recommendations made in Special Report No 22/2014 by delivering specific training for the managing authorities
and paying agencies, enhanced assessment of the
verifiability and controllability of the measures and
promotion of the use of simplified cost options.
Furthermore, the systems in place for ensuring
that the costs of the projects are reasonable will
be assessed in the framework of conformity audits.
Financial corrections will be applied in cases of
non-compliance.
66
Reply of the Commission
Recommendation 2 (c)
This recommendation is for the Member States.
Recommendation 2 (d)
This recommendation is for the Member States.
Common Commission reply to
paragraphs 107 and 108
Information available through the monitoring
and evaluation system was the best available at
this stage, taking into account financial and prac­
tical limitations. The Commission has proposed
a number of improvements to the monitoring and
evaluation system for the 2014-2020 programming
period, while considering the need to find a balance
between the benefits of monitoring and evaluation
and the costs and administrative burden related to
it.
109
The 2014-2020 monitoring and evaluation system
incorporates a number of improvements.
Enhanced annual implementation reports (AIRs) will
be issued in 2017 and 2019, which will incorporate
evaluation findings. The first report will concentrate
on the programme steering and the second one
on the assessment of the impact of the RDPs. The
Member States will be required to carry out evaluation activities throughout the programming period
in accordance with the evaluation plan included
in the RDPs. The assessment and reporting on the
results and impacts of the policy will be linked more
appropriately to the stage of implementation.
To further underpin the result orientation of the
policy, its assessment against relevant policy objectives will be strengthened.
Recommendation 3 (a)
The Commission accepts this recommendation.
However, given the limited value of assessing measures in isolation, the Commission is of the opinion
that evaluation should be carried out at the level
of the focus areas, which reflect policy objectives.
Moreover, the Commission stresses the importance
of evaluation to interpret and analyse the data collected in order to draw conclusions on effectiveness
or efficiency.
Recommendation 3 (b)
This recommendation is for the Member States.
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The EU co-finances investments in rural infrastructure with
the aim to improve competitiveness of the agricultural and
forestry sectors and increase the quality of life in rural
areas. This audit examined whether the Member States
and the European Commission have achieved value for
money with the funds allocated. The audit found that the
need for EU rural development funding was not always
clearly justified, coordination with other funds was weak
and selection procedures did not systematically direct
funding towards the most cost-effective projects. The
Commission and the Member States have not collected
adequate information on the effectiveness or efficiency of
the measures funded, making it difficult to direct future
policy and manage the budget by results.
EUROPEAN
COURT
OF AUDITORS